The Risk and Insurance Management Society (RIMS) said it supports Standard & Poor's adoption of an enterprise risk management framework as a component of its ratings reviews for companies, but its evaluation process could still use improvement.

RIMS said in a statement it provided feedback on Feb. 29, expressing conceptual support of S&P's proposed ERM analysis and at the same time, offering concerns and recommendations "regarding potential implementation and resource issues in applying the proposed framework."

ERM is the process of planning and managing the activities of a business to minimize not just risks associated with accidental losses but also financial, strategic, operational and other risks.

RIMS said that in November 2007, S&P issued a request for comment from the risk community on plans for an ERM analysis for credit ratings of nonfinancial companies.

While RIMS said it does not advocate the use of one ERM framework over another, it congratulated S&P on its work to date and its forward-thinking approach for recognizing the value of ERM in evaluating the credit quality of a broad cross-section of companies.

In its comments, RIMS said S&P's rating approach "drives ERM from a sometimes difficult-to-define concept to a management practice that directly and visibly impacts the organization."

RIMS added that the framework also will compel "corporate decision-makers to explicitly consider risk. This is something many companies are probably doing on an informal basis, but S&P's focus on ERM and its independent rating will improve that process by driving management to a more formal methodology in order to address S&P's inquiry."

RIMS said it supports S&P's adoption of an ERM framework as a component of its ratings reviews because a well-implemented ERM program is characteristic of a well-managed company "and does indeed enhance an organization's credit quality to investors and shareholders."

While the S&P assessment framework provides certain structural requirements for an ERM program, RIMS said there is room for improvement.

RIMS said it encourages S&P to consider whether its framework and evaluation process is flexible enough to fit any given company's culture and management style, particularly with S&P's apparent focus on applying a sector-specific platform.

RIMS also asked S&P to carefully consider the different operating perspectives of financial institutions and nonfinancial companies, and take these differences into account as it transitions the assessments for nonfinancial companies.

RIMS suggested that S&P consider a continuum of ERM maturity in assigning its ratings--offering its Risk Maturity Model as a tool for consideration.

The association said it "looks forward to continuing to work with S&P in order to accelerate ERM best practices across all industries."

Special Reports /

RIMS Gives S&P's ERM Efforts An 'A-Minus'

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