Leaked information is rattling executives and politicians globally. But the literal elements of a leak stem from uncontainable fluids, and the adverse consequences can be more immediate. Rolls Royce (LON:RR) is facing just such a problem. Their Trent 900 engine, the power source for a number of airlines such as Quantas that fly the Airbus A380, appears to have a welding flaw in an oil pipe. The pipes are at risk of leaking, and the consequences of an oil leak include catastrophic engine failure. In reputation speak, this is a "safety" issue. In operations speak, this may be another example of a reputation risk arising from the supply chain. A quick word on Rolls Royce and their supply chain. As summarized by then chairman Sir Ralph Robins in 2000, "Seventy per cent of an engine's content is in the supply-chain and only 30% comes from in-house. We get all excited about cost-reduction in-house, but the supply chain is where it really counts."

According the the Financial Times, the current problem may cost the company up to $500m. According the to the Steel City Re Corporate Reputation Index metrics, the reputation cost is just beginning to manifest. The reputation index began the trailing twelve month period in the 63rd percentile and is currently in the 71st percentile relative to the 14 companies in the Aerospace and Defense peer group. However, the Index had been as of late in the low 80th percentile, and several dynamic metrics are providing indications of adverse value change: the exponentially weighted index moving average (EMWA) is up to 17%, and both the vector and velocity over the trailing twelve weeks are negative.

For the present, however, the equity returns over the trailing twelve months are equal to the median of the peer group, while the intangible asset fraction is below that of the peer group but equal to the mean of the S&P500 Index constituent members. Look to IAM magazine issue 46, due in March 2011,  for an extended examination of this Company from an intangible asset, risk, and reputation management perspective.