Investors are taking an increasingly comprehensive approach to evaluating corporate performance, calling on companies to more visibly demonstrate how they are managing their intangible assets, working strategically to build long-term value and to differentiate themselves from competitors. Companies' performance in key areas of conduct such as corporate governance, environmental management and employment practices can have a significant impact on their financial valuation.

Independent rating of how companies are managing their intangible assets lifts the quality and credibility of corporate reporting and analysis.

CoreRatings provides corporate responsibility and corporate governance ratings to companies upon their request. Publication of the rating is at the company's discretion: it may choose to use the detailed rating report internally only, or it may disclose the rating to the market. Sharing the rating with investors helps them compare different companies’ risk profiles and identify the companies most capable of managing material, current and future governance and responsibility risks. In other words, communicating a rating to the market is an effective (and resource efficient) way for a company to:

§ manage investor perceptions of intangibles and related risks

§ convey the quality of its risk management capabilities

§ demonstrate compliance to regulators, and

§ go beyond compliance to communicate the integrity of its risk management performance to broader stakeholders.

This may serve as a significant differentiation advantage in a competitive market.

A rating is also a valuable diagnostic tool for companies to use in their internal risk management processes; an independent evaluation of a company's risk profile (benchmarked against industry standards and international best practice) helps prioritise risk management activities and align them with broader business aims and strategy.

For example, CoreRatings’ corporate responsibility rating identifies the material environmental, social, employment and business ethics risks facing an industry and the individual company. Each risk is ‘mapped’ according to its probability (short and long term) and its potential effect on investment value.

CoreRatings’ methodology centres on the premise that the financial effect of these risks primarily materialises through intangible asset drivers such as brand, reputation, innovation and intellectual capital, as well as a company’s ability to anticipate and manage its legal liabilities and regulatory compliance. CoreRatings examines the following seven investment value drivers:

§ Brand value: The growth or decline in the value of individual product brands resulting from changes in market/consumer perceptions.

§ Intangible value: Long-term changes to the broader intangible value of a company, including reputation, intellectual property and goodwill attached to a company (or subsidiary) name; license to operate.

§ Collateral reputation: The positive or negative effect of the company’s activities on the reputations of key suppliers, customers, creditors and investors.

§ Regulatory compliance:The ability to fulfill regulatory obligations (past, current and future).

§ Legal liabilities: The exposure of companies to individual or class actions as a result of their specific activities.

§ Access to people skills: The ability to attract and retain, at an economic price, the skills needed in local and international operations; the ability to manage employee satisfaction and productivity.

§ Competitive advantage: The capacity to predict and benefit from changes to consumer/ stakeholder expectations and technological advances; the ability to innovate to gain or maintain a leadership position in the market.

Once the risks are mapped, CoreRatings takes an in-depth look at a company’s policies and their implementation, how management systems are validated as well as the quality of performance, disclosure and stakeholder dialogue. The subsequent analysis and scoring provide boards of directors with clear indicators of the material corporate responsibility risks they need to control and report on to shareholders and stakeholders.

A critical factor in successful operational risk management is communication and documentation of strategy and policies across a company. Building internal awareness and identifying clear responsibilities for managing corporate responsibility and governance risks – and where necessary articulating the business imperative for establishing new structures, resources and processes – will serve to ensure buy-in from all employees, business units and management levels. This includes non-executive directors who may need to better understand a company’s governance and responsibility risk profile and practices.

An in-depth, independent review of how a company ‘does its business’ can strengthen and focus internal dialogue and play a valuable role in the process of embedding credibility, transparency and accountability internally.

The intellectual capital, global industrial knowledge, risk management expertise and investor insight of CoreRatings and DNV come together in the ratings to deliver an independent, credible, third-party evaluation of companies’ risk profiles. Combining the expertise of DNV and CoreRatings generates exciting synergies that meet the market need for enhanced independent measurement of material investment risks.

With the tools for independent analysis and validation of companies’ governance and responsibility performance now available, prudent companies are signing up to use them. Can you afford not to?

For more information, please visit www.coreratings.com or contact Gemma Taylor-Gee, Marketing Manager on Gemma.Taylor-Gee@dnv.com or Dr Helena Barton, Business Development Manager (USA) on Helena.Barton@dnv.com.