Kroll Bond Rating Case Study

Case: Kroll Bond rating Agency

In this case Jerome Funs is considering what strategy to propose to Jules Kroll pertaining to ventures in the creation of a new small rating agency. This new agency would be joining other agencies, including the big three: Fitch, Moody’s, and Standard and Poor’s (S&P). A new agency in the mix could be a big success – but this move would be easier said than done, and there are key issues besides the large costs associated to the decision situation at hand that need to be addressed and thought out in this case.

Overall, Jules Kroll’s plan to enter the credit rating business is a good plan if it is approached with the right mindset regarding business structure, concentration, and how the agency is marketed to the public. The timing is good because the big ratings agencies received criticism after the fall in creditworthiness and prices of mortgage- and asset- backed securities during the financial crisis in 2008 and 2009. This resulted in public trust diminishing in these large agencies. This faulted trust is something a new agency can capitalize on. The incumbent credit raters in the financial crisis failed by loosing sight of what they were their to do – give accurate ratings business decisions can be made from – sustained by logical revenue streams. The incumbents made money the wrong way, via a conflict of interest, found by the SEC, which ruined the integrity of ratings. This affects Kroll’s opportunity in a positive way. This opens up opportunity for the new small agency to gain followers quicker than if the public already had firm loyalty established toward the big agencies already in existence. In many ways the crisis that occurred, and the reasons why have broken down barriers to entry for a smaller agency.

If Kroll proceeds with their plans as suggested in this write-up, the best way to enter this area of business is to establish a key mission and build a robust business plan off that mission. A good place to start would be latching onto the words Kroll used in describing the to-be business earlier on, integrity and accuracy. The three agencies that do ratings have been accused of building false hope up in securities via issuing ratings far too optimistic. This opens up opportunity for Kroll to capitalize on their mistake. Kroll can do this by branding the new agency on a foundation of realistic ratings the public can trust and make sound financial decisions off of. Something catchy, such as, “Get real, go Kroll” could work to their favor in establishing a good foundational reputation for the place to look for true ratings.

The structure of the agency should support the mission and key words the agency exists upon to drive business and foster demand for the agencies services. The Kroll corporate intelligence firm has been around since 1972. It is important for the public to know that although the agency would be new