What is the primary concern of rating organizations?

The primary concern of rating organizations is the risk of default. Rating agencies assess the creditworthiness of issuers, which includes governments, corporations, and various financial instruments. The focus on default risk stems from the need to evaluate the likelihood that an issuer will be unable to meet its debt obligations—such as interest payments or the repayment of principal—due to financial distress or insolvency.

By analyzing various factors such as financial performance, industry conditions, and macroeconomic environment, these organizations provide ratings that help investors make informed decisions regarding the credit risk associated with different investment opportunities. A higher level of default risk correlates with a lower credit rating, which in turn influences the interest rates that borrowers must pay to attract capital.

Contextually, while declining purchasing power, market price fluctuations, and illiquidity are relevant considerations in the financial landscape, they do not directly capture the immediate risk that rating organizations aim to quantify and communicate. Default risk directly impacts an investor's return and is therefore prioritized in credit ratings.