Strategic Decision-Making in the Entrepreneurial Millennium: Competition, Crisis and "Expert" Risk Assessment of Emerging Market Sovereigns.

The article focuses on strategic planning in international credit-rating agencies. This chapter examines strategic decision-making by expert organizations during periods of increased competitive and environmental turbulence. We address this by examining decision-making factors and processes familiar to one set of expert organizations important to the foreign investment decisions of firms and other organizations: international credit-rating agencies ("agencies"). Credit-rating agencies serve a critically important advisory role in the financial capital markets by providing objective assessments of the risk of various borrowers on a widely known multi-point (17 level) scale. Specifically, we examine agency risk assessments of emerging-market sovereign borrowers, and the occasionally turbulent environments in which they vie for sovereign risk-rating business. We develop and test six hypotheses. Our results indicate first that crisis conditions are linked to negative deviations from objective risk assessment models used by the agencies. We conclude that close examination of these trends in the data help explain rating miscues by the agencies in emerging-market countries during the 1997-8 crisis period. The examination also provides us with research insights and managerial prescriptions for other expert organizations making risk-assessments in other contexts where the twin stresses of crisis and competition - strategy hallmarks of an entrepreneurial millennium - are likely to interact.