How are we different from other rating agencies?
Scope’s Corporate Ratings methodology reflects a truly European approach which assesses underlying rating drivers and compared to the larger credit rating agencies’ (CRAs), is unconstrained by the attempt to shoehorn regional differences into a global product. Scope recognises European culture and markets differ, particularly from the US market, where shareholder is king. European economic leaders like Germany and France, are characterised mainly by privately held companies with management philosophies that tend towards caution and longer-term horizons than capital market oriented economies.
To a large extent this European difference is expressed by a more diverse corporate structure than the US and includes a willingness to hold large cash balances to guard against risk. Both examples tend to be firmly incorporated in, although not exclusive to, family-owned companies in Europe, which remain a cornerstone of European corporate culture. Germany has about the same number of private companies exceeding USD2 bn in revenues than the whole US. By contrast, the focus on shareholder value in capital market-oriented economies has over time actually contributed to the erosion of corporate diversification.
Large cash holdings are also usually prey to hungry shareholders in those markets, much more than in continental Europe. A US-centric rating agency, with a traditional focus on its home market, is often not ideal to capture European cultural differences. Scope aims to adequately reflect the European corporate reality in its ratings with a truly European product and believes it is better suited for this than large CRAs with their global, ‘onesize-fits-all’ ambitions. With our concept, we believe Scope is a better partner for privately owned and publicly listed companies alike, as family values and a long-term ratings approach unify both.
Scope’s Corporate Methodology relies on a fundamental, forward-looking and bottom-up approach with three key rating sections: business risk, financial risk and supplementary key rating drivers. We strive for maximum transparency without being mechanistic. Key to our corporate ratings approach is thoroughly understanding a company’s underlying drivers – for both business and financial risk – while leaving enough room for analytical opinions, regional context and common sense.
Scope Ratings CEO Torsten Hinrichs on our corporate rating segment
CEO Torsten Hinrichs Interview FINANCE-TV