MISSION INTANGIBLE

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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Target: Risks when stakeholders expect more, and the board is blind

C. HUYGENS - Monday, May 05, 2014
Reputation risk is when stakeholders expect behaviors from a company that it can't deliver. It is an enterprise-level event. Target, one of the largest American retailing companies, founded in 1902 and headquartered in Minneapolis, Minnesota, encourages its customers to "expect more." Around twenty weeks ago, Target failed to meet expectations twice: through a breach in IT security and then through poor follow up management of the consequences.

When a company such as Target has a superior reputation and then fails to meet expectations, stakeholders may give the company the benefit of the doubt. However, failing twice without an adverse reaction is asking much from stakeholders today. The board of directors at Target, as we learned today, was not about to take chances. Adverse reactions include what the Financial Times defined some time ago as "the pile on of litigators, regulators and mommy bloggers." The Germans call it a "shitstorm." And unless immunized prior to the crisis, the primary beneficiaries of the opprobrium from the masses are the company's directors and officers.

Neither the Directors nor Officers of at Target was immunized. This morning, Target announced that Chairman, President and CEO Gregg Steinhafel is out. Steinhafel, a 35-year veteran of the company and CEO since 2008,  agreed to step down, effective immediately. He also resigned from the board of directors. The modern day Jonah was thrown into the sea by his directors to appease the mobs evidencing a reputation crisis. Or perhaps the board over-reacted.

Calling for the heads of directors and officers is not new. D&O liability insurance was introduced years ago in recognition of the fact that a disenchanted stakeholder group needed to vent, and it was unreasonable to ask directors and officers to bear the personal costs. Alas, absent immunization, they are bearing the personal costs to their reputation. "They" include the risk committee board members of JPMorgan Chase, the four senior-most directors at Duke Energy, and now the Chairman and CEO of Target.

Favoring the argument that the board overreacted, shares in Target fell nearly two percent in pre-market trading Monday. Ninety minutes into the trading day, shares were down nearly 3% while the S&P500 was flat. Equity investors, it seems were  disappointed with the removal of Steinhafel who has reinforced Target's reputation for stellar customer-oriented service. Of course, there is the alternative explanation that investors are both delighted Steinhafel is gone and are expecting more bad news which is not yet public but, which known to the board, Other sources of intelligence, specifically, the Steel City Re reputation metrics, favor the first explanation - the Board of Directors unnecessarily tossed Steinhafel overboard to appease the crisis management gods.

Twenty weeks out from the breach, Target's reputational value is staging a comeback from the initial depression. The substantial drop in the company's Reputation Premium from the high 80's to below the 50th percentile is stabilizing around the 64th percentile relative to the 15 companies in the Discount Stores peer group. In fact, last May around this time, Target's Reputation Premium was lower. Further, looking at the measures of reputational volatility, the Consensus Trend, there was never a major shock among key stakeholder groups. Overall, Reputational Health is good.



How good is a good reputational health? In the case of Target, its reputational value peaked near June 2013 as shown in the 3-year chart below. The decline in reputational value since then is nearly linear, with the immediate effects of the data breach being nothing more than a short-term shift in the overall trend.  In other words, the data breach was not the long-term cause of Target's loss of Reputation Premium nor the long-term cause of Target's loss in Reputational Value. Rather, the entire industry - discount retailing -- is losing its value proposition. The data breach at Target helped temporarily mask the real cause of decline: the business strategy is failing.

It can be argued that a CEO is obliged to fall on his sword for advocating and implementing a failing strategy. And with this in mind, it might be argued that the equity price fall Monday morning represented equity investor recognition of the real reason for termination. But frankly, absent quantitative metrics to inform the board, management, and the communications arms of Target, it is hard to know what they know or why they think they acted the way they did. Worst, if Steinhafel was aware of the overall industry decline and was working on a plan to save Target, then it is a particularly bad time to be making changes at the top. Remember how well that worked out for JCPenny (JCP).

Managing an operational failure with one eye towards the media is prudent, but the tail should not wag the dog. If the real problem is a sector decline, it would be best to focus attention on that problem and not the irrelevant noise generated by those who make a living generating noise. Sir John Rose, former CEO of Rolls-Royce (LON:RR), set the standard to putting mind to what mattered when he ignored the media for weeks after a Rolls-Royce engine exploded on a Quantas super jumbo in November 2010. Instead, he identified the source of the problem and fixed it to the satisfaction of regulators, and more importantly, a key customer. Less than 10 weeks after what was viewed as a reputational crisis, British Airways announced that it was equipping its latest super jumbo acquisitions with...the same Rolls-Royce engine. And as Rolls-Royce spent ample cash indemnifying customers for downtime, and as the sales book was booming and stock price rocketing, less than 20 weeks after the affair, Sir John stepped down, sat on his motorcycle, and rode into the sunset.

Twenty weeks from the breach and the Chairman/CEO has been sacrificed. Quantitative reputation metrics, including the Loss Gates charts for Target's objectively measured crisis trigger points, do not show a crisis. It is one more example of a needless loss of executive life.

Management and boards require metrics to do their work properly, and Directors and Officers deserve protections for their personal reputations in shitstorms. Absent measures of reputational value, rash decision informed only by PR and media activity may be made with awful consequences. Absent protections for corporate leadership, good people may be thrown overboard to no avail. There are many lessons to be learned here.

IAFinance.org Monthly Traffic

C. HUYGENS - Sunday, May 04, 2014
In the book, Reputation, Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012), quality is defined as the extent to which a product is free from defects or deficiencies; the extent to which a service meets or exceeds the expectations of customers or clients, especially in comparison to peers; and the extent to which products and services conform to measurable and verifiable criteria. It is an intangible asset and one of six pillars of reputation.

An indication of quality, and by extension, the reputation of something like the Mission Intangible Blog of Intangible Asset Finance Society is the growth in readership. Two years ago in May 2012, this blog received 10,228 page views according to metrics provided by Business Catalyst, a unit of Adobe. Last month, April 2014, this blog received 351,000 page views. Thank you for your interest.

RepuStars 2014 May 2

C. HUYGENS - Saturday, May 03, 2014

Weekly Reputation Index Metrics


At the close of trading May 2, 2014, REPUVART and REPUVAR stood at 3635.28 and 3024.03 respectively. Over the past four weeks, the former has changed by 1.48%, while the latter has changed by 1.10%. The benchmark S&P500 Composite Index stood at 1638.51 (31 Dec 2001=1000) and has changed over the past four weeks by 0.86%. The current calendar year spread between REPUVAR and the S&P500 is -2.63%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 7.80% and 5.57% respectively; the S&P500 Composite Index has changed by 17.75%. The trailing 12-month spread between REPUVAR and the S&P500 is -12.18%.

Over the trailing 36 months, the REPUVART and REPUVAR have changed by 30.40% and 23.47% respectively; the S&P 500 Composite Index has changed by 38.66%.

The 4-week, trailing 12-month, and trailing 36-month returns for REPUSPX are 3.45%, 19.61%, and 82.68% respectively. The trailing 12-month spread between REPUSPX and the S&P500 is 1.86%.

The spreads between the S&P500-only index informed by reputation metrics, REPUSPX, and the broad market index informed by reputation metrics, REPUVAR, for the calendar year and for the trailing twelve months respectively are 2.66% and 14.04%.

Other interval changes in the magnitude of the indices are shown in the tables and charts below.

Analysis

At the macroeconomic level, it’s another week of mixed data. Consumer confidence according to the Conference Board is down slightly. Unemployment is down, but participation in the job market is also down raising further fears of a unemployable bloc. Online job boards show an increased number of available positions. Last, CEO confidence is up – a measure that correlates well with appreciation of stock options as the equity market continues to hold its gains.

Meanwhile, the greatest gains in the RepuStars Variety portfolio for 2014 year are being reported by Weatherford Intl. Ltd (WFT) is in first place with returns of 41.58% for the year; Rite Aid Corporation (RAD) is in second place with returns of 40.79% for the year; and Cavium Inc (CAVM) is third first place with returns of 24.11% for the year. These are three of the 41 firms identified by the RepuStars Variety algorithm at the start of 2014 as value opportunities.

As for those whose reputational value may have been overestimated, Pharmacyclics, Inc. (PCYC) is trailing the entire portfolio with returns of -34.81% for the year; VistaPrint Limited (VPRT) is second from last place with returns of -24.01% for the year; and Mobile TeleSystems OJSC... (MBT) is third from last with returns so far this year of -17.19%.

Turning to RepuSPX whose constituents are limited to the S&P500 members, the top three performers in a portfolio of 35 names are Pepco Holdings, Inc. (POM) is in first place with returns of 44.28% for the year; Garmin Ltd. (GRMN) is in second place with returns of 23.30% for the year; and Lorillard Inc. (LO) is in third place with returns of 18.74% for the year.

Side Note: A description of the portfolio constituents and historical returns data from December 31, 2001 can be obtained on request from Technology Option Capital, its manager. Click Here.

Background

The RepuStars® Variety Corporate Reputation Index calculated by S&P/Dow Jones Indexes is the first-ever composite equity index based on a quantitative value strategy informed by the Steel City Re Reputational Value Metrics. The metrics comprise non-financial indicators of reputational value (RVM) and ranking (CRR). These are the same metrics that power the reputation controls provided by Consensiv, and the league table of reputational value, the Consensiv 50,  published periodically, and most recently January 1, 2014, by CFO.com.

The RepuStars Variety Corporate Reputation Index has two versions: a total returns index and a price index, whose ticker symbols are, respectively, REPUVART and REPUVAR.  Click on the ticker names for real time quotes.

The RepuStars Variety Corporate Reputation Index tracks up to 57 company stocks that appear to be underpriced relative to  Steel City Re’s proprietary Reputational Value Metrics™, which track 7400 companies weekly. The principles behind measuring reputational value are described in the book, Reputation, Stock Price, and You: Why the market rewards some companies and punishes others (2012, Apress).

The RepuStars indices are reconstituted annually in the first week of January and posted by S&P/Dow Jones Indexes in the third week. The Indices were last reconstituted 18 Jan 2014.

REPUSPX  is a pocket index with portfolio constituents being selected algorithmically by the same criteria as the constituents for REPUVAR and REPUVART, except that the field of eligible companies is limited to constituents of the S&P500 composite equity index.

The strategy used to pick the constituent members of REPUSPX, REPUVAR and REPUVART is discussed in the book, Reputation, Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012). (Link below)

Reputation, Risk and Finance

Reputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:

1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the second Friday of every month, read the book, Reputation, Stock Price and You: Why the market rewards some companies and punishes others (2012)  or its predecessor, Mission: Intangible. Managing risk and reputation to create enterprise value (2010), available at the IAFS Store, specialty finance sector retailers, or other leading online book retailers
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow and/or follow Twitter missives at #ReputationRisk.

Notices

S&P Dow Jones Indices is a registered trademark of S&P Dow Jones Indices LLC, a part of McGraw Hill Financial; RepuStars and Steel City Re” are registered trademarks of C. Huygens & Co. LLC. The method underpinning the RepuStars Variety indexes is subject to a pending patent assigned to C. Huygens & Co. LLC. S&P McGraw Hill Financial and its affiliate (S&P Dow Jones Indices) makes no representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and McGraw Hill Financial shall have no liability for any errors, omissions, or interruptions of any index or the data included therein. Past performance of an index is not an indication of future results. All information provided by S&P Dow Jones Indices is general in nature and not tailored to the needs of any person, entity or group of persons. S&P Dow Jones Indices receives compensation in connection with licensing its indices to third parties. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments offered by third parties that are based on that index. S&P Dow Jones Indices does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that seeks to provide an investment return based on the performance of any Index. Investment products based on the RepuStars Variety Corporate Reputation Indexes are not sponsored, endorsed, sold or promoted by Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC, or their respective affiliates and none of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC and their respective affiliates make any representation regarding the advisability of investing in such products. Inclusion of a company in any of the indexes in this piece does not in any way reflect an opinion of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates on the investment merits of such company. None of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates is providing investment advice in connection with these indexes.

Pepco: Reputational value, realized

C. HUYGENS - Wednesday, April 30, 2014
Pepco Holdings, Inc. (POM) is a holding company, that, through regulated public utility subsidiaries, is engaged primarily in the transmission, distribution and default supply of electricity and the distribution and supply of natural gas. Earlier this year, Steel City Re’s reputational value metrics suggested there was significant value implied by the expectations of stakeholders that was not being appreciated by equity investors. On that basis, POM became one of the 35 constituent members of the 2014 RepuSPX portfolio, a composite equity index comprising only constituent members of the S&P500 selected for reputation-implied arbitrage opportunities.

After the close of markets Tuesday, Exelon announced that it is buying Pepco Holdings Inc. for $6.83 billion to create a large electric and gas utility in the Mid-Atlantic region. Exelon will pay $27.25 per Pepco share, an 18 percent premium to the company's $23.10 closing price on Tuesday.

Purdue: Space cadets

C. HUYGENS - Monday, April 28, 2014
While the business sector can expect fluctuations of value on the order of 14% on average due to changes in reputational value, the academic sector can expect to shine or suffer a slow and ignoble death -- or at least a brief period of panic . Huygens enjoys regaling in stories of Universities that earn their reputation the old fashioned way - by producing graduates who go on to distinguished careers.

Purdue University can rightfully boast about such a story. It is the number one producer of American astronauts.

Read more.

RepuStars 2014 April 25

C. HUYGENS - Sunday, April 27, 2014

Weekly Reputation Index Metrics


At the close of trading April 25, 2014, REPUVART and REPUVAR stood at 3591.57 and 2989.93 respectively. Over the past four weeks, the former has changed by 1.51%, while the latter has changed by 1.17%. The benchmark S&P500 Composite Index stood at 1623.06 (31 Dec 2001=1000) and has changed over the past four weeks by 0.31%. The current calendar year spread between REPUVAR and the S&P500 is -2.79%.

Over the trailing twelve months, REPUVART and REPUVAR have, respectively, changed by 7.58% and 5.05% respectively; the S&P500 Composite Index has changed by 17.55%. The trailing 12-month spread between REPUVAR and the S&P500 is -12.50%.

Over the trailing 36 months, the REPUVART and REPUVAR have changed by 28.79% and 22.02% respectively; the S&P 500 Composite Index has changed by 38.31%.

The 4-week, trailing 12-month, and trailing 36-month returns for REPUSPX are 3.93%, 21.28%, and 81.70% respectively. The trailing 12-month spread between REPUSPX and the S&P500 is 3.73%.

The spreads between the S&P500-only index informed by reputation metrics, REPUSPX, and the broad market index informed by reputation metrics, REPUVAR, for the calendar year and for the trailing twelve months respectively are 1.91% and 16.23%.

Other interval changes in the magnitude of the indices are shown in the tables and charts below.

Analysis

It’s pundit v. pundit over at the Washington Post where experts are calmly explaining either why the market is in a long-term stable run or is nothing more than an inflated bubble about to burst. Huygens’ vote is with the latter, but this is how Steven Pearlstein explained what he sees as statistical and anecdotal signs of exuberance on Friday: http://www.washingtonpost.com/business/steven-pearlstein-warning-signs-of-a-credit-market-that-could-go-pop-soon/2014/04/25/ef049716-ccac-11e3-a75e-463587891b57_story.html

Last week in this space, columnist Barry Ritholtz wrote that the five-year bull market on Wall Street isn’t about to end — it’s merely entering a more measured and mature stage after last year’s spectacular 30 percent stock market returns. My message to you this week is that Barry is probably wrong because he’s looking at the history of stock market cycles rather than what we should be looking at in these unusual circumstances, which is the credit cycle. And right now the credit markets are in bubble territory, propping up stock and real estate values as well.

Meanwhile, the greatest gains in the RepuStars Variety portfolio for 2014 year are being reported by Weatherford Intl. Ltd (WFT) is in first place with returns of 39.54% for the year; Rite Aid Corporation (RAD) is in second place with returns of 25.04% for the year; and Cavium Inc (CAVM) is in third place with returns of 18.01% for the year. These are three of the 41 firms identified by the RepuStars Variety algorithm at the start of 2014 as value opportunities.

As for those whose reputational value may have been overestimated, Staples, Inc. (SPLS) is third from last place with returns of -11.52% for the year; Mobile TeleSystems OJSC... (MBT) is second from last place with returns of -18.70% for the year; and Pharmacyclics, Inc. (PCYC) is trailing the entire portfolio so far this year with returns of -34.39%.

Turning to RepuSPX whose constituents are limited to the S&P500 members, the top three performers in a portfolio of 35 names are Entergy Corporation (ETR) is in first place with returns of 17.04% for the year; Pepco Holdings, Inc. (POM) is in second place with returns of 16.84% for the year; and Garmin Ltd. (GRMN) is in third place with returns of 16.25% for the year.

Side Note: A description of the portfolio constituents and historical returns data from December 31, 2001 can be obtained on request from Technology Option Capital, its manager. Click Here.

Background

The RepuStars® Variety Corporate Reputation Index calculated by S&P/Dow Jones Indexes is the first-ever composite equity index based on a quantitative value strategy informed by the Steel City Re Reputational Value Metrics. The metrics comprise non-financial indicators of reputational value (RVM) and ranking (CRR). These are the same metrics that power the reputation controls provided by Consensiv, and the league table of reputational value, the Consensiv 50,  published periodically, and most recently January 1, 2014, by CFO.com.

The RepuStars Variety Corporate Reputation Index has two versions: a total returns index and a price index, whose ticker symbols are, respectively, REPUVART and REPUVAR.  Click on the ticker names for real time quotes.

The RepuStars Variety Corporate Reputation Index tracks up to 57 company stocks that appear to be underpriced relative to  Steel City Re’s proprietary Reputational Value Metrics™, which track 7400 companies weekly. The principles behind measuring reputational value are described in the book, Reputation, Stock Price, and You: Why the market rewards some companies and punishes others (2012, Apress).

The RepuStars indices are reconstituted annually in the first week of January and posted by S&P/Dow Jones Indexes in the third week. The Indices were last reconstituted 18 Jan 2014.

REPUSPX  is a pocket index with portfolio constituents being selected algorithmically by the same criteria as the constituents for REPUVAR and REPUVART, except that the field of eligible companies is limited to constituents of the S&P500 composite equity index.

The strategy used to pick the constituent members of REPUSPX, REPUVAR and REPUVART is discussed in the book, Reputation, Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012). (Link below)

Reputation, Risk and Finance

Reputation management through superior control of a company's intangible assets may be one of the best paths to value creation today. If it is not on your agenda, perhaps it should be. Here are several things you can do right now to start creating value for your organization:

1. Become better informed. Participate in our regular Mission Intangible Monthly Briefings held on the second Friday of every month, read the book, Reputation, Stock Price and You: Why the market rewards some companies and punishes others (2012)  or its predecessor, Mission: Intangible. Managing risk and reputation to create enterprise value (2010), available at the IAFS Store, specialty finance sector retailers, or other leading online book retailers
2. Become a member of the Intangible Asset Finance Society and engage.
3. Join our community on Linked-In and stay in the information flow and/or follow Twitter missives at #ReputationRisk.

Notices

S&P Dow Jones Indices is a registered trademark of S&P Dow Jones Indices LLC, a part of McGraw Hill Financial; RepuStars and Steel City Re” are registered trademarks of C. Huygens & Co. LLC. The method underpinning the RepuStars Variety indexes is subject to a pending patent assigned to C. Huygens & Co. LLC. S&P McGraw Hill Financial and its affiliate (S&P Dow Jones Indices) makes no representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and McGraw Hill Financial shall have no liability for any errors, omissions, or interruptions of any index or the data included therein. Past performance of an index is not an indication of future results. All information provided by S&P Dow Jones Indices is general in nature and not tailored to the needs of any person, entity or group of persons. S&P Dow Jones Indices receives compensation in connection with licensing its indices to third parties. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments offered by third parties that are based on that index. S&P Dow Jones Indices does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that seeks to provide an investment return based on the performance of any Index. Investment products based on the RepuStars Variety Corporate Reputation Indexes are not sponsored, endorsed, sold or promoted by Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC, or their respective affiliates and none of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC and their respective affiliates make any representation regarding the advisability of investing in such products. Inclusion of a company in any of the indexes in this piece does not in any way reflect an opinion of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates on the investment merits of such company. None of Technology Option Capital, LLC, C. Huygens & Co, LLC, Steel City Re, LLC or any of their respective affiliates is providing investment advice in connection with these indexes.

Covering D's & O's Where D&O Liability Protections Don't Work

C. HUYGENS - Saturday, April 26, 2014
The Board is liable for everything that happens in a company. This includes unforeseen adverse events precipitated by third parties, supply chain partners, rogue employees and others that result in significant economic, political, and reputational consequences.

When greed and fear trigger mob shareholder behavior and the principle of presumed innocence is quickly trampled, the D's & O's are easy targets. Hence the logic of providing D&O liability cover. When directors are upholding their duties with superior governance, controls and risk management practices, it would be unfair expose them to the financial costs of (irrational) shareholder opprobrium.

It would seem equally unfair to expose them to the personal reputational costs of that opprobrium - the biting sarcasm of late night talk show hosts, the kabuki of hearings before regulators, and the angry chatter of the blogging classes. All this noise has personal consequences on both their health and future board-level opportunities. From the origins of the modern reputation crisis -- James Burke who was lambasted as a steered his firm through two Tylenol poisonings to Sir John Rose who protected Rolls-Royce's reputation despite the howling of the media -- there is an effort to crush corporate leadership through a "pile on of litigators, regulators and mommy bloggers." Hence the logic of providing D&O personal reputation cover.

The need for personal protection has never been greater. Just this month, less than 90 days after of the nation's worst coal ash spills, the California Public Employees' Retirement System and New York City Pension Funds wrote to shareholders of Duke Energy Corp, urging them to vote against the re-election of four directors. "The financial, legal, regulatory and reputational risks for Duke Energy are serious and mounting," Calpers corporate governance director Anne Simpson and New York City comptroller Scott Stringer wrote in their open letter.

Most Directors are unaware that such protections exist. Most Risk Managers, overwhelmed with the day-to-day tactical aspects of their jobs, are similarly unaware of the existence of new strategic solutions to address corporate reputation risks - solutions to transfer reputation risk and solutions to manage reputation risk. Fortunately, professional organizations such as the Risk and Insurance Management Society are raising the profile of reputation risk for the benefit of their members -- risk managers who have an absolute duty to protect their Boards.

This month's issue of the Society's Risk Management magazine, and next week's annual meeting in Denver provide opportunities for Risk Managers to anticipate the inevitable demand that will come from their Boarda. This is one risk that no Risk Manager should dare leave behind.

Magazine Link: How to Manage Reputation Risk, April 2014

Meeting Link: Reputation: Your Company Is Worried About It-Is It Part of Your ERM Strategy?

Periodic Short Notes Twitter Link: #ReputationRisk

IP Quality - 1, 2, 3 What Are We Fighting For? - 16 May 10h00 EST Mission Intangible Monthly Briefing

C. HUYGENS - Friday, April 25, 2014

Briefing Friday 16 May at 10h00 ET

Program: IP Quality - 1, 2, 3 What Are We Fighting For?


The hardest part of business to business contracting used to be haggling over price; today, it is just as likely to be haggling over intellectual property rights. This is because Intellectual Property is potentially valuable -- provided it is really good stuff. What are the measures of "good?"

Joining the program to explore the patent quality and quality controls, and the critical role of the business executives in enabling patent quality, are John W. Kepler, JD, an attorney and authority on IP quality; and James M. Singer, an intellectual property attorney with Fox Rothschild and head of the firm's IP section. Mr. Singer and the law firm of Fox Rothschild LLP support the Society through pro bono legal advice in intellectual property matters.

Jonathan Salem Baskin,  Managing Director of Consensiv, moderates. Learn more.

Reputation Value: Municipal edition

C. HUYGENS - Thursday, April 24, 2014
The public sector is no less sensitive than the private sector to the economic effects of reputation - boosted when good, and dragged down when bad. Who can forget that day in August 2011 when 'Brand USA' saw $1 trillion wiped off its value after Standard & Poor's cut its bond rating.

Nations, states, school districts and municipalities should rightfully be concerned about their reputation. As should universities and hospitals. Reputation is what draws people to these geographies and to these institutions.  When they arrive to live, work, study or heal, they have expectations that need to be met. Failure to meet those expectations would put their reputational value at risk.  Huygens reviewed earlier this week several recent examples of self-inflicted reputational wounds.

Measuring and reporting the reputational value for public companies, like General Mills earlier this week, is not difficult for third parties such as Consensiv, because the expectations of stakeholders are readily expressed in publicly available economic data. The expectations of at least one group of stakeholders for sovereigns, universities, and hospitals can be gleaned from publicly available debt data, but for the most part, data reporting on the expectations are closely held. For privately held entities, insight into stakeholder expectations can be best elicited through private decision markets.

Private decision markets are not easy to structure; opinion polls, on the other hand, are very easy to administer. Unfortunately, opinion polls are poor substitutes for private decision markets. Like many other marketing tools, the ability of opinion polls that purport to report on "brand" to also predict or impact economic activity is limited, as a municipality seeking to understand and improve its own reputation quickly learned.

Read more.

GlaxoSmithKline: Measure it, already!

C. HUYGENS - Wednesday, April 23, 2014
Pundits lamenting that reputation is the hardest risk to manage would do well to remember the adage, "you can't manage what you can't measure." The choice is simple: lament or deploy metrics. Metrics of what, you might ask?

Reputational value is an outcome of stakeholder expectations of operational performance. The measure of that value is best evidenced by the financial consequences of stakeholder actions. Stakeholders reveal their expectations with the way they use their wallets to buy, lend, regulate, or otherwise do business.

The reputation metrics reported by Consensiv score reputational value from a proprietary array of financial sources, bringing together heretofore disparate data points into an aggregate measure of stakeholder expectations.

Read more.

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