About Our "Risk, Value & Trends Report"

A Timely AHC Group Report on Trends in the
Capital Markets and Investment Community

Risk, Value & Trends Report


In today's volatile risk climate, there is rapid evolution in investment, regulatory, and stakeholder expectations. This 65-page executive summary incorporates investment trends, findings from research for our Corporate Affiliates HP, Merck, ConocoPhillips, and insights on how best to capture the investment value of your capital markets.

Added bonuses include an exclusive trends report from the CFC of IRRC (Linda Crompton), from the head of S&P's Governance Practice (George Dallas), and from Alan Banks, the former CEO of Fitch Core Rating and a former UBS Investment banker.

CSR and the Search for Shareholder Value

AHC Group affiliates gathered in Washington at the end of April 2005 to discuss the role of rating agencies in influencing investors' and stakeholders' view of how well companies are managing their governance and CSR issues. AHC affiliates heard from Alan Banks, AHC Senior Associate and expert in the investment valuation of risk; Linda Crompton, President and CEO of IRRC, the leading voting and proxy agency; George Dallas, Managing Director and Global Governance Practice Leader at Standard & Poor's; and Alois Flatz, head of Research and member of the Board of DJSI/SAM, the leading sustainable investment index.

The background is the rapid evolution in investment, regulatory, and stakeholder expectations. It is clear that shareholder activism, already well established in Europe, is spreading to the U.S. markets. There has been a significant increase in shareholder resolutions, in direct shareholder engagement with companies, and in shareholder groups working in partnership with NGOs challenging companies on key issues such as climate change. Companies are coming to grips with the risk control and reporting requirements of Sarbanes Oxley and the SEC's increasingly close scrutiny of risk reporting in the MD&A and of governance issues. For international companies, there is the added complexity of European reporting structures and the EU's legislation, such as the introduction of a cap and trade scheme for carbon emissions. U.S. states are becoming more aggressive in pursuing compensation for environmental hazards and emissions, and this cost will be factored into investment valuations.

These market forces are leading investors to look critically at governance and CSR issues and their effects on sectors and individual companies. As Alan Banks pointed out:

  • The standard investment valuation models require investors to put a number on how well a company is managing those risks that are material to investors' interests.
  • This number — usually rolled up in the discount rate used to discount estimated future earnings/cash flows — is highly material to valuations, accounting for between 25% and 40% of market capitalization or 15% of the cost of debt.
  • In many cases, market-leading companies are managing their risks better than their peers, but this is not being reflected in lower discount rates and superior investment valuations.
  • Companies can increase shareholder value by actively managing the investment market's perception of risk in their stock.

There are many different agencies seeking to mediate between companies and investors in analyzing governance and CSR issues and risks. They can be grouped into the following categories:

  • Sustainable asset managers
  • Brokers
  • Equity index providers
  • Voting and proxy agents
  • CSR rating agencies
  • Governance rating agencies
  • Credit rating agencies

The role each agency plays, the question it is seeking to answer, who it reports to, and its methodology are quite different. Companies often need expert advice on communicating with the different agencies, including:

  • What does each agency do and which part of the investor/regulator/stakeholder community do they primarily report to?
  • Who really has influence and who can be safely de-prioritized?
  • What are they looking for and how do you do well in their assessment?
  • Since all the agencies are looking at essentially similar data, how can a company standardize its data collection to meet as many agency needs as possible?
  • How does this tie into a company's enterprise risk management system and the company's own view of risk?
  • Given that a company understands and manages its risks well, how does it capture extra shareholder value from investors for these efforts?

AHC Group — which understands the risk issues, the agency market, and the investment markets — can partner companies in building extra shareholder value through understanding, managing, and communicating their risks. We have developed a number of tools to help you do this:

  • IHS: Tailored in-house seminar to get Investor Relations, Legal Counsel, Internal Audit, Risk Management, and Finance to a common level of understanding.
  • CRR: Critical Review of Reporting to investors, agencies and stakeholders.
  • IRA: Enterprise-wide Investor Risk Analysis — looking at the management and reporting of risk from the point of view of key investors and analysts and its effect on your investment valuation.

For further details, please email Dr. Bruce Piasecki (518.583.9615), President and Founder of the AHC Group. Dr. Piasecki, who has over 25 years of experience in this arena, can provide you with additional information on how this exclusive report can provide added value to your near-term market future.

Purchase Risk, Value & Trends Report here »

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If for any reason the download is not successful, please contact Marti Simmons at marti@ahcgroup.com or call 518.583.9615.

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