The chairman’s letter in the annual report, signed 6 March 2012, is clear. “The board set three priorities for BP,” wrote Carl-Henric Svanberg. “Safety must be enhanced and embedded. Trust must be regained. Value must be created through a clear strategic plan”

Safety, now a factor in the executive bonus plan, is tangible evidence of the company’s strategic priorities of reinforcing safety and risk management, rebuilding trust and reinforcing value creation of its intangibles. At group level, the safety and risk management component includes targets for recordable injury frequency, loss of primary containment and implementation of change programmes. Rebuilding trust is focused on external reputation as measured by external surveys and internal morale as measured by surveys.

BP’s board considers reputation from two perspectives – the reputational risks to the group and the processes the company has in place to manage these risks. In 2011, the board reviewed external reputation data which looked at BP’s reputation in the UK and US. It also discussed the group’s communications strategy and its reputation management plan.

To assure that stakeholders know that BP is serious about reputation and its risk management, the annual report offers up the term 20 times in the 10k section 1A-Risks. The term also appears liberally throughout the balance of the document for a total of 45 mentions over twenty different pages in the 300 page document.

In what appears to be a growing trend first announced formally at UBS, but clearly preceded by BP, both reputation measurement and reputational risk are major issues at the Board level. This is why: as reported here earlier, firms that have superior reputations newly discovered can pickup an average of 6% of market cap, while firms that experience a reputational crisis can lose an average of 7%. Anything that can precipitate a 13% swing in value is bound to get the attention of a corproate board.

The Steel City Re reputation metrics for BP this week show the following trends: BP’s reputational value metric, a non-financial indicator of reputational value, is stabilizing with a near median volatility relative to its peers, and a long term forecast of stability. The company’s corporate reputation ranking, an indicator of relative standing, places the firm in the 81st percentile. Since the volatility indicators are neutral, the data do not yet indicate a near term boost in equity returns above the median for the peer group. After years of reputational volatility, it appears at this point that equity investors are waiting for further evidence of material risk reduction in RepRisk -- reputation risk. Nevertheless, considering where things were two years ago, BP has come "a long way baby."

If volatility is misery to most equities, and misery likes company, then (with apologies to Gordon Gekko), volatility, for lack of a better word, is good. At least if you are BP.

Notwithstanding its poster-child status for reputational crises, BP's trailing twelve month returns are slightly above the median of its peer group in the 40-member integrated oil company sector and its intangible asset fraction is up even though its relative reputational standing continues to slide.

The explanation for this unusual mix of reputational metrics is volatility. BP's exponentially weighted moving average volatility is now at 75%; its vector and velocity are gyrating wildly. But look at the industry peers.

Between and among the members of this sector, the volatility is less than 20% even while the sector as a whole, or at least its median value, is in the 70th percentile bracket relative to all 6000 companies measured by the Steel City Re corporate reputation index.

The data suggest that when a company's reputational issues trigger volatility, value is lost; but when that volatility begins to resemble the volatility of the market, then behaviors associated with market fear take over and reputational factors take on only secondary importance to residual value. In that context, where 70% of the median value of a company is linked to book assets such as oil, BP looks less risky.