Governance Risk Diagnosis

Determine & reduce your real governance and operational risk in Dollars & Cents

Corporate meltdowns such as Lehman demonstrated that most risk is below the shiny surface of what companies present, deeply submerged in governance and operational processes. In fact, M&E quantitative research has revealed that risk rates are 4-6x higher than the discount rates normally applied to companies by analysts and investors. Thus, with outdated risk analysis methods, which are still widely used, investors are taking on much more risk than they think when they buy company equity or debt.

The M&E Governance Risk Diagnosis uses a sophisticated mix of calculations to capture a more total risk number. It is based on past performance and the strength of governance and operational systems, which give it a forward looking dimension. The M&E method has been used to calculate the risk of nearly 300 companies worldwide and is used in the two M&E indexes, the Brazil Stars Index (a joint venture with LatinFinance) and the Hong Kong Stars Index (a joint venture with BDO Financial). Both indexes have strongly outperformed their benchmarks.

This M&E rating method was first launched and published in 2003 in leading media such as the Global Edition of Time Magazine (worldwide circulation 4 million), The Economist and Bloomberg TV New York. Hundreds of companies have since been assessed and rated using the M&E

Why Client Companies Use the M&E Governance Risk Diagnosis Method

  • To quantify total risk, pinpointing its exact source & change these risks into sources of profits
  • To avoid governance crises, fines by regulators and drops in stock price
  • To reduce legal risk
  • To understand where profits and losses are coming from in their companies

Dimensions covered

  • Compliance with best practices: Checks the compliance with hundreds of governance and sustainable management standards relevant to your company, sector and country
  • Financial/management performance: Uses M&E ratios which relate management investments to financial performance such as Return on Management, Return on Training, Litigation Risk, and many more
  • Strategic performance: Quantifies strategic performance
  • Risk: Measures the volatility in Financial/management performance

For each diagnosis, the critieria are adjusted to your country, sector and phase in your company´s development.

How the M&E Governance Risk Diagnosis Works

The entire rating process lasts between 3 and six weeks and consists of three stages:

sustenible

  1. Desk Research: M&E researches your company, referring to public sources, such as your annual report, S&P rating reports and media coverage. The result of this stage is to develop and present a customized criteria list which will be used for the rating.
  2. Onsite interviews: 4-10 interviews with key executives are necessary to understand your strategy and corporate culture. We may request additional information.
  3. Calculation and final report: Based on the current and historic information and data we collected , we calculate the final score, management value and rating grade. Unlike most ratings, the final phase is purely quantitative. We submit and personally present a detailed final report revealing your detailed strengths and weaknesses, as well as practical recommendations .

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Governance Risk Diagnosis

The financial crisis of 2008 was a result of governance weaknesses which were not quantified or priced in. The crisis cost the World an estimated $20 trillion Dollars--over $7 trillion more than World War II. With the M&E method, the governance and operational risk of companies can be calculated, weaknesses pinpointed and remedied.

ROI of Human Capital & Governance

SMART ROI ™ (trademark in the USA) and ROS® (trademark in all other markets) accurately calculates and raises the Return on Investment of human capital and governance processes of all kinds, ranging from employee training to corporate culture, governance, IR, certification, marketing and CSR. SMART ROI™ / ROS® is a registered trademark used on over 110 clients projects with a total volume of $5 billion.

SRI Investor Relations

With a current investment volume of roughly $14 trillion, Socially Responsible Investing (SRI) is one of the strongest investment trends with 50% of assets under management in Europe invested according to SRI guidelines. U.S. grow rates are over 20% p.a. Together with its partners LatinFinance and BDO in Hong Kong, M&E helps companies more effectively attract SR investors.