What type of risk is assessed by credit rating agencies? Do these agen

What type of risk is assessed by credit rating agencies? Do these agencies generally assign individuals or teams to assess a firm’s risk? What are some of the ways the rating agencies are paid for their services?

What will be an ideal response?

ANSWER

Credit agencies for the most part assess a firm’s creditworthiness, or its chance of default. To do this they assemble teams of analysts who consider market as well as proprietary information provided by the firm. They look at the firm, the industry, the economy and even country risk is determining a firm’s default risk.
Agencies are most commonly paid by the issuer of new securities who pay the agency to rate them.