TEN YEARS HENCE
Ten Points About Future Business Trends
APRIL 16, 2010
On April 16, 2010, Catherine Mathis, senior vice president of marketing and communications at Standard & Poor’s, presented a talk on key business trends, which contained the following excerpts:
- Three trends that will play out in the coming decade are an increasing demand for transparency from our customers, investors, employees and other stakeholders; the digital revolution; and globalization.
- In the corporate world, transparency denotes a willingness to disclose relevant information on a timely basis to the marketplace and openness in communications. Transparency is critical to the smooth functioning of the financial markets.
- This year, for the first time, trust and transparency ranked at the top of the list of factors important to corporate reputation, according to a survey called the Trust Barometer conducted by global PR firm Edelman.
- What may end up happening is that companies that obfuscate will be punished and those that are more transparent will be rewarded. This will have significant consequences for businesses, because we will have to do a better job of educating our management teams on how to communicate in a more transparent manner.
- We support many aspects of the proposed financial reform legislation that improve transparency, accountability and oversight of credit rating agencies. It is important for the restoration of confidence that all market participants study the financial crisis and determine what went wrong and how it can be fixed.
- At Standard & Poor’s, we have been applying a number of the lessons from the financial crisis to adopt some constructive measures. A key component is to help people understand what we do and how we go about doing it. This means expanding the amount and types of information that we provide to our investors and others.
- In the past, we thought it was enough to provide people with the conclusions of our analysis. Now we also provide the assumptions and the criteria that we use in arriving at our conclusions. It means answering questions like how have our ratings performed, and what is the process that a security goes through in order to be rated.
- After the financial crisis, we revised the criteria that we use to rate securities. Now we say they would have to meet a Great Depression type of scenario to get the highest rating that we give, which is AAA. We also looked at our internal procedures and processes and came up with 27 leadership actions to improve the ratings process. For example, our analysts must go through a certification process in conjunction with New York University to improve their ability to rate debt.
- Because of the digital revolution, we look for ways to give our information to clients in the format they want: in print, podcasts, text, video or mobile. We also are developing customizable models and tools, so the client can see how changes might affect a company, a sector, or a security. This has been an area of growth for us.
- Emerging markets will need more and more financial services. A decade ago, Standard & Poor’s generated about a quarter of its revenues from outside the United States. Last year that number was around 40 percent. Our businesses outside the United States have been growing at a rate of about twice that of our domestic business.
Catherine J. Mathis is senior vice president of marketing and communications for Standard & Poor’s. She is a member of the company’s senior management team and serves as S&P’s primary spokesperson. Previously, Mathis was senior vice president of corporate communications for The New York Times Company.