Programs: Enron, World-Com, and Tyco- What were they good for?
The recent accounting scandals have resulted in permanent changes in the world of credit managers. We briefly explore the common threads to these scandals and the extensive reaction of politicians, bureaucrats, capital markets and businesses. The potential impact of new laws, which represent the single largest change in corporate governance since the Securities and Exchange Act of 1934, are analyzed so that credit managers know what to expect and how to respond. We review the various pressures that credit managers may experience related to these issues and then focus on specific credit evaluation techniques and procedures that are necessary in a post-Enron economy. This includes an analysis of off-balance sheet financing and its potential impact on the credit worthiness of a potential customer.