We make three points. First, this is a physical security breach that does not, on its surface, appear to have any reputation impact. The financial impact will be minimal because the event is one of the perils commonly covered by property and casualty insurance. The second is that this is the type of physical security risk most companies are best prepared to mitigate - physical removal. Most are not in a position to mitigate the reverse security risk of physical introduction--the type of physical security risk that nearly brought Johnson & Johnson (NYSE:JNJ) to its knees a quarter of a century ago.
Here's a worst case spin from a reputation perspective. Fact: Lilly has lost control of $75 million (wholesale) of product. These drugs are all branded and marked as authentic Lilly ethical pharmaceuticals which stakeholders expect will be safe and effective. Suppose branded product reentered the market after being adulterated. Suddenly, the Johson & Johnson fiasco seems like child's play.
You ask for a motive? How about the mother of all insider trades? Would criminals who execute a Mission:Impossible-style heist have the financial acumen to short Lilly equity or go long on Lilly credit default swaps as they flood the market with adulterated pharmaceuticals? Could they recognize returns in excess of $75 million in fungible liquid assets?
And this brings us to the third point. Superior reputation management includes both crisis management and scenario modeling exercises. Because even rumors suggesting the above could be damaging.
Heads Up - Date ChangeThe Mission: Intangible Monthly Briefing for April 2010 will be held one week later than usual in deference to those who celebrate Good Friday. On 9 April 2010 at 12h00 EDT, the second Friday of the month, we will host a conversation featuring incoming Integrity and Corporate Responsibility Committee Chairman Paul Liebman from Dell (NASDAQ:DELL) and IA Value Signaling Committee Chairman Jon Low from Predictiv. The title for the one hour moderated discussion is: Ethics - A valuable intangible asset? Mary Adams from Intellectual Capital Advisors hosts.
As always, registration for this popular series is complimentary and slides will be available for download in advance of the event. To register now, click here.