S&P’s steps to further manage potential conflicts of interest, strengthen the ratings process, and better serve the markets
Governance: Ensuring Integrity of the Ratings Process
- Establish an Office of the Ombudsman that will address concerns related to potential conflicts of interest and analytical and governance processes that are raised by issuers, investors, employees and other market participants across Standard & Poor's Ratings Services ("S&P") businesses. The Ombudsman will have oversight over the handling of all issues, with authority to escalate all unresolved matters, as necessary, to the CEO of McGraw-Hill and the Audit Committee of the Board of Directors.
- Engage an external firm to periodically conduct an independent review of S&P Ratings' compliance and governance processes for the purpose of publicly issuing an opinion that addresses whether S&P is effectively managing potential conflicts of interest and maintaining the independence of its ratings.
- Hold periodic reviews with the Audit Committee of the McGraw-Hill Board to discuss S&P Ratings' overall governance and compliance function which will include: (1) key business measures of ratings quality and compliance effectiveness, (2) the concerns and resolution of issues addressed by the Office of the Ombudsman, and (3) results of the independent reviews, by an external firm, of S&P Ratings' governance and compliance processes.
- Formalize functions with responsibility for policy governance, compliance, criteria management and quality assurance of the ratings and make them separate and independent from the Ratings business units.
- Establish an enterprise-wide Risk Assessment Oversight Committee that operates separately and independent of the business. The Committee will assess all risks that could impact the ratings process. This committee will also assess the feasibility of rating new types of securities.
- Implement “look back” reviews to ensure the integrity of ratings, whenever an analyst leaves to work for an issuer.
- Institute periodic rotations for lead analysts.
- Increase level of existing employee training to ensure compliance with policies.
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