SAP Aims to Cash In on Corporate Risk Evaluations

SAP is betting that enterprises will be struggling to cope with Standard & Poor’s (S&P) new ratings criteria and is introducing a new offering designed to help them address S&P’s enterprise risk management (ERM) evaluations.

The evaluations, which will begin in the third quarter, will target non-financial companies, S&P said. They will focus on risk management culture and strategic management, which it describes as “two universally applicable aspects of ERM.”

S&P, the financial research and ratings giant, announced in May that it would begin evaluating non-financial companies on their enterprise risk management. The evaluations are scheduled to begin in third quarter, according to the company, and will focus on risk management culture and strategic management, which it describes as “two universally aspects of ERM” in the May report.

In response, vendors like SAP are angling to provide tools and services that can help companies address S&P’s evaluations, which could have an impact on their credit ratings.

SAP’s offering, created jointly with consulting partners Deloitte, IBM Global Business Services, PricewaterhouseCoopers and risk auditor Protiviti, consists of a suite of software, services and best practices frameworks.

“Together with our partners, we provide customers with pre-populated content which looks at what are the top risks by industry that companies need to look at, and what risk indicators and recommended thresholds they need to be aware of,” Narina Sippy, senior vice president of SAP’s governance, risk and compliance group, told

This “will provide customers with a jumpstart based on our partners’ expertise and experience, for what could otherwise be a very comprehensive exercise if a company hasn’t done this before,” Sippy said.

In addition to S&P’s forcing the issue and other recent efforts to alert businesses to the growing problem of properly handling ERM, the Casualty Actuarial Society, an actuarial industry body, has said that enterprise-wide resource management is becoming important “partly as a result of the Sarbanes-Oxley Act of 2002.”

The announcement also comes just a day after accounting firm Crowe Chizek and Company announced that ERM has become a serious issue for CFOs and internal auditors.

Surveys commissioned by Crowe and conducted jointly with CFO Research Services found more than 65 percent of CFOs and 70 percent of companies’ audit committee members said ERM would be the biggest challenge for their enterprises during the next 12 months.

Respondents to the surveys also said they considered ERM a bigger challenge for CFOs than improving financial reporting and internal controls.

“These results showed us that enterprise risk management has become a huge challenge for those charged with managing a company’s financial health, with many looking for guidance on the next steps they should take,” Jonathan Marks, an executive with Crowe’s risk services group, said in a statement.

The surveys also found that less than 25 percent of senior finance executives described their company’s performance as “excellent” in risk management.

Most major companies are looking at and tracking risk in one form or another, SAP’s Sippy said. However, she added that the process tends to be “very manual, often confined to just the finance organization, and isn’t part of the core business.”

The S&P directive “says to companies they need to look at how they’re managing risk in a programmatic fashion,” Sippy added. It “suggests to companies, don’t look at ERM after the fact or have it in some binder somewhere and dust it off when you need it.”

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