Credit Assessment and Consulting in Rating Agencies Research Paper

Credit opinion and Consulting in Rating Agencies - Research Paper Examplensulting services whereby debt issuers request rating agencies to direct them on the manner to structure their debt issues with the aim of securing a favorable rating (Crockett, Harris, Mishkin & White, 2004). In such circumstances, the credit rating-rating agencies are in effect auditing their own work. Moreover, credit-rating agencies may deliver favorable ratings so as acquire extra clients for the ancillary consulting business.Much of the challenges associated with Credit Assessment and Consulting in Rating Agencies relate to the reliability and integrity of ratings. Investors utilize credit ratings that mirror the probability of default to ascertain the creditworthiness of certain debt securities (Langohr & Langohr, 2008). Conflict of sake can yield a decrease in the flow of reliable information centering on either concealment of the information, or dissemination of misleading information (Brooks & Dunn, 2010). This has dire consequences on the value of stakeholders benefits.The markets can in around instances ameliorate the impacts of contraventions of wager within financial services firms and cannot always contain the incentives to exploit conflicts of stakes. Some of the approaches to remedying conflict of interest encompass leaving it to the market or letting market forces resolve the conflict by penalizing financial firms that exploit conflict of interest and instituting new institutional means to contain conflict of interest (Brooks & Dunn, 2010). The other approaches encompass regulating for transparency through mandatory disclosure and supervisory oversight. Additional approaches towards remedying conflicts of interest within credit rating agencies encompass separation of functions and socialization of information production.In conclusion, there is a need to enhance accountability of Credit Rating Agencies so as to negate the pitfalls associated with conflict of interes t (Werther & Chandler, 2006). Reputation remains one of the key