Bangkok--24 Dec--Standard & Poor's
According to a recently published report, Standard & Poor's Ratings Services views industry risk, in the context of credit analysis, as the impact of an industry's characteristics on a specific entity within that industry. The identification and analysis of an industry's opportunities and risk characteristics is the first step in developing a robust understanding of industry participants' external operating environment. Industry risk analysis sets the stage for entity-specific credit analysis. The report, titled "Major Factors Affecting Industry Risk," was published Dec. 21, 2010.
"A broad spectrum of factors can create and exacerbate industry risk," said credit analyst David Wood. "The presence and impact of these factors usually varies by industry--often materially, creating distinct industry risk profiles." Major generators of industry risk include:
-- Cyclicality and seasonality;
-- Competitive and growth dynamics, including the potential for asset price bubbles;
-- Operating and technological factors;
-- Capital intensity and liquidity characteristics; and
-- Regulatory, government, and legal considerations.
Industries that have a high concentration of these factors tend to have much higher industry risk than those with lower exposure. "Broadly speaking, the lower the industry risk, the higher the potential rating on issuers in that sector," Mr. Wood said. Sectors with lower industry risk tend to have stronger business risk profile scores than sectors with higher industry risk. "However, a high industry risk profile does not automatically limit our rating on an issuer," he added. "Issuers can positively differentiate themselves by using successful business risk strategies and cautious financial strategies." The report discusses major factors in industry risk, providing examples of how these affect specific industries.
The report is available to RatingsDirect subscribers on the Global Credit Portal at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contact:
David Wargin, New York (1) 212-438-1579,
[email protected]
Analyst Contacts:
David Wood, New York (1) 212-438-7409
Solomon B Samson, New York (1) 212-438-7653
Kurt Forsgren, Boston (1) 617-530-8308
David Bodek, New York (1) 212-438-7969
Liesl Saldanha, London (44) 20-7176-3571