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Avoid Unwanted Counterparty Risk Exposure Five Steps to Take in 2022

This article is written and published by S&P Global Market Intelligence, a division independent from S&P Global Ratings.

We are in a new era for counterparty risk. In 2020, global corporate defaults in S&P Global Ratings’ universe of rated issuers totaled 226, up 91% from the previous year.[1] Much of this was due to defaults in the U.S. and Europe, regions that account for the largest number of rated issuers and that had been heavily affected by the COVID-19 pandemic. [2] According to S&P Global Ratings, broadly credit quality is continuing to recover slowly, with net upgrades so far representing only about 12% of the net COVID-induced downgrades in 2020. [3]

Small- and medium-sized enterprises (SMEs) have felt the burden of the COVID-19 pandemic more than larger companies that have better access to credit.[4] The magnitude will also vary by sector and sub-sector.[5] Adding to this, the pandemic has brought environmental, social, and governance (ESG) risks to the forefront, as well as the deep linkages that exist between businesses and their stakeholders across value chains. [6]

The growing complexity posed by these intersecting risks calls for a sharp focus on counterparty assessments, underscoring the need for deep and timely data and robust analytical tools. This infographic describes the five steps that credit risk professionals typically take to protect their organizations from counterparty risk exposure.

Protect Your Organization 

Credit risk professionals play an important role in organizations throughout the capital market ecosystem. 

As COVID-19 continues to put a heavy strain on global credit conditions in 2022, it is critical to have rigorous methodologies and robust data in place to spot the early warning signals of potential credit quality deterioration of key counterparties and investments.

[1] Credit ratings are prepared by S&P Global Ratings, which is analytically and editorially independent from any other analytical group at S&P Global.
[2]  “How can one identify the early-warning signs of credit deterioration?”, S&P Global Market Intelligence, March 9, 2021, Read More
[3]  “Global Credit Conditions Q4 2021: Supply Chain Strain, Inflation Pain”, S&P Global Ratings, September 29, 2021.
[4]  “COVID-19: Assessing The Credit Risk Impact On Small- And Medium-Enterprises (SMEs)”, S&P Global Market Intelligence, July 24, 2020, Read More
[5]  “The Outlook For Corporate Credit Risk; COVID-19 Pandemic And Macroeconomic”, S&P Global Market Intelligence, May 11, 2020, Read More
[6]  “Pandemic Pandemonium, The ESG lens on COVID-19, Part 1”, S&P Global Market Intelligence, April 20, 2020, Read More

Five Steps to Avoid Unwanted Exposure

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