Scope Ratings Introduces New Methodology for Services Companies and Invites Feedback

Scope Ratings, a Berlin credit rating agency, has unveiled its proposal for a Consumer and Business Services Methodology designed to augment its existing General Corporate Rating Methodology. The new framework is tailored for European consumer and business services companies and incorporates a comprehensive array of industry-specific risk drivers. Scope Ratings welcomes comments on the proposed methodology until November 24, 2023, as it strives to enhance transparency and credit assessment in the services sector.

The scope of this methodology is vast, encompassing services offered to both businesses and consumers. It can also be adapted for non-European entities where deemed appropriate. The assessment of the financial risk profile of services companies will continue to rely primarily on the metrics outlined in Scope’s general corporate rating methodology.

A More Nuanced Approach

The introduction of this new methodology aims to enhance credit differentiation by offering a nuanced assessment of credit factors tailored to the services sector. It encompasses industry-specific credit risk evaluation and provides a comprehensive understanding of rating drivers that are crucial when analyzing services companies.

Services companies, under this methodology, are classified as either B2B or B2C. Those generating a substantial portion of their revenue and cash flow from services provided to other businesses or directly to consumers fall into these categories. Furthermore, the methodology differentiates between asset-light and asset-heavy service providers, as well as those that require specialized workforces versus those utilizing unspecialized workforces or digitalized services. It is important to note that IT services are not covered by this methodology.

Key Methodology Highlights

The new methodology introduces several significant refinements to the assessment of services companies:

The introduction of this methodology reflects Scope Ratings’ commitment to refining its credit assessment methodologies and making them more industry-specific. By encouraging comments and feedback from the financial community, they aim to ensure that the methodology accurately captures the nuances and dynamics of the services sector, providing a more comprehensive and transparent approach to credit rating assessment.