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Article Excerpt
Abstract While conventional rating systems are still focused on individual companies, in reality stand-alone business of a single enterprise respectively debtor is more likely the exception than the rule. Joint business activities of two or more companies (organizational networks) are becoming ubiquitous and have a critical influence on each partners' success. In order to avoid that rating that turns into some rather useless ritual, network characteristics, such as network assets, network capital, network securities, network management competency, network business opportunities and network structure have to be taken into account when evaluating solvency of a network-embedded corporation. Using primary credit cooperatives as an illustrative object, this paper gives an overview on those new rating criteria becoming relevant in conjunction with network-embeddedness, so that workable opportunities can be shown to improve the reliability of ratings.
Keywords Co-operatives * Co-opetition * Organizational networks * Rating * Value Net
JEL D80 * G10 * G20 * G30
Introduction
Conventional rating systems in business and management, especially in banking, are focused on individual companies. But nowadays, a stand-alone business of a single enterprise respectively debtor is more likely the exception than the rule (Stahl and Eichen 2005). Joint business activities of two or more companies, organized in value networks, are becoming ubiquitous. Often this collaborative entrepreneurship beyond the strict borders of conventional enterprises is not considered by the architecture of rating systems. However, neglecting the complexity of network structures can turn rating into some rather useless ritual. In consideration of new legal frameworks such as Basel II, that continuously raise requirements with respect to validity of rating systems, it is imperative to examine, which challenges rating of network-integration corporations is faced with. Using German primary credit cooperatives, which are integrated into a strategic network called Finanzverbund, as an illustrative object, it can be shown impressively that conventional rating systems have to rise to a broad spectrum of challenges.
The German Credit Cooperatives' Finanzverbund: A Prototypical Organizational Network
There are two paths leading to organizational networks. On one hand, network structures can be a result of eroding trust structures, e.g. going along with spin-offs, carve-outs or leasing (e.g. sale-and-lease-back, leasing of manpower). On the other hand, network structures can result from consolidation of loose market-relationships, flowing into virtual companies (e.g. Amazon, Ebay), strategic alliances (e.g. Star Alliance, badge engineering by Fiat and Ford), outsourcing (e.g. Porsche, sourcing out assembly to Valmet Automotive), joint ventures (e.g. Toll Collect) or working pools (e.g. when organizing infrastructure projects such as railway building). Besides, traditional and still popular forms of organizational networks are cooperatives. All those varieties mentioned have in common, that not conventional size, expressed by criteria like private property, manpower, establishments or balance-sheet volume, is critical, but rather virtual size, i.e. the option to access to resources in private property of other organizational units (e.g. via sharing or leasing).
Particularly in the banking sector, network structures become more and more important (Petry and Rohn 2005, pp. 265-272). A very impressive example of a network structure is the German Finanzverbund, a strategic network of approx. 1,200 credit cooperatives (e.g. Volksbanken, Raiffeisenbanken), acting as business centers, central banks (e.g. Deutsche Zentral-Genossenschaftsbank) respectively federations (e.g. Bundesverband der Deutschen Volks- und Raiffeisenbanken), acting as network-centers, and...
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