Credit – are customers the next competitors?
Jinfo Blog

By Tim Buckley Owen

Item

Credit rating agencies have been in the news again recently – and possibly once again for the wrong reasons. But the ratings industry addresses a wide spectrum of activity, and the power of the agencies’ customers may be growing.

Standard & Poors’ recent downgrading of the United States’ long term sovereign credit rating from triple-A to double-A plus seems to have been greeted with indifference. President Barack Obama made clear that he didn’t need a rating agency to tell him that the US needed a balanced, long-term approach to deficit reduction and S&P’s principal rival Moody’s disagreed too, confirming the US’s triple-A rating (although it did assign it a negative outlook), while its blogger Mark Zandi added that losing the S&P triple-A rating had “little actual significance”.

Nevertheless US politicians remain exercised by the influence the rating agencies have over the economy. Not long before the downgrade, the Congressional Financial Services Committee’s Oversight Committee hauled the heads of both Moody’s and Standard & Poors in to testify, amid concern that provisions in the Dodd-Frank Act could undermine efforts to reduce the “outsized role” that the agencies had come to play.

Corporate information managers may argue that sovereign debt rating issues are way beyond their pay grade. But underlying all of this is the reputation of the rating industry as a whole – right down to the scoring of small scale customers and suppliers.

And it can get very small. Equifax, for example, has recently announced that it is adding “lost wallet” assistance to its consumer credit monitoring and identity protection product, providing further protection to individual consumers who might be at risk of identity theft as a result. (Follow links to 18 July.)

Between these two extremes, there is the workaday rating of the kinds of businesses that information professionals may well need to monitor. Thomson Reuters, for instance, has just launched an enhanced version of its Kondor Global Risk product, incorporating a combined credit and market risk engine with a new dynamic dashboard for easier visualisation of risk exposure.

Or take recent discussion on the LinkedIn network of the Business Information Industry Association – beginning some two months ago with a posting by network founder Joachim Bartels. He drew attention to a comment by veteran information industry commentator David Worlock that, in electronic publishing, customers are the next competitors.

Bartels added that that was precisely what was happening in commercial credit information. Apparently, two industry associations have begun competing with each other to provide “freshly investigated” credit reports, based on amalgamating reports from local agencies.

It’s sparked a lengthy discussion of what constitutes “fresh”. Sovereign it isn’t – but it’s just the sort of stuff that info pros need to concern themselves with.

« Blog