Report Clarifies S&P's Position On Basic Precepts Of Enterprise Risk Management

NEW YORK Sept. 21, 2005--During in-depth discussions with leading risk managers, Standard & Poor's Ratings Services has noted differences of opinion on several fundamental precepts of enterprise risk management (ERM) in general and risk management of trading operations in particular. In a report published today entitled "In Pursuit Of Best Practices For Enterprise Risk Management," Standard & Poor's draws some conclusions about the best practices of ERM.

"Three areas show a range of opinion," says Standard & Poor's risk management specialist Prodyot Samanta. "They include the role modern portfolio management measurement methods should play in risk management practices; what 'independence' of risk managers should actually mean; and the extent of the power of the risk management function.

"Our position is that three attributes of ERM best practices are important," Mr. Samanta concludes. "First, a robust internal information system is needed that permits sophisticated analysis of portfolio risks and stress testing. Second, risk limits need to be assigned by the risk function down to the desk level. Finally, a holistic and well-articulated risk tolerance statement is an important aspect of developing a strong risk culture."

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