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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BP: Reputation restoration 101

C. HUYGENS - Sunday, October 03, 2010
It is hard to be describe the process of reputation restoration more concisely than this:

If we meet our obligations like we have been, then over time people will say – this was a good corporate citizen to respond to an accident that has been a wake-up call to the entire oil and gas industry. If we ensure this doesn't happen again then maybe we can restore our reputation in the US.

Bob Dudley, CEO, BP (NYSE:BP)
1 Oct 2010

To enumerate:
1. Acknowledge the problem and identify both the proximate and systemic cause(s)
2. Repair risky processes to mitigate the cause(s)
3. Raise the bar for the entire industry.

Yes, it's that simple. Now go execute. Not sure how? Then join the Society and become part of the premier global resource for professionals seeking enterprise-wide strategies that foster an ethical and innovative business culture, increase the quality, safety, sustainability and security of goods and services, and enhance reputations.

Welcome aboard, Huygens

Nir Kossovsky - Friday, October 01, 2010
Modeled on a well respected newspaper whose formula has been described as "a consistent world view expressed, consistently, in tight and engaging prose,” this blog has presented articles that take a definite editorial stance. Moreover, this blog publishes the Corporate Reputation Index (from Steel City Re), an instrument unique in its scope and content that provides decisive statistics on intangible assets and their umbrella, reputation.

In the spirit of that newspaper, the bylines from these blog posts are retiring to obscurity. In their stead, please welcome a name that reflects their topic. Effective today, the blog posts will be attributed to C. Huygens - named for Christiaan Huygens, a prominent Dutch mathematician, astronomer, physicist, horologist, and writer of early science fiction whose 1657 publication on probability theory laid the foundation for risk management and insurance.

Click here to listen to four native Dutch speakers pronounce the name, Christiaan Huygens  (and that of his landsman, Antony van Leeuwenhoek.)

Goldman Sachs: It's only a flesh wound

Nir Kossovsky - Wednesday, September 29, 2010
Goldman Sachs (NYSE:GS) is back. As reported by the Dow Jones wire service Monday 27 September 2010, Goldman Sachs has retained its coveted position at the top of the league table of M&A advisers by both revenue and number of deals globally, and for the U.S. and Europe, during the first nine months of 2010, figures from Dealogic show Monday. Goldman's dominance in the coveted list--only twice broken in the past ten years--is unchanged compared with a year ago on a global basis for the first nine months of the year, reinforcing the idea that the investment bank continues to see little fallout from the negative publicity it has garnered this year.

On a global basis, Goldman advised on 225 deals, with a total value of $401.6 billion, Dealogic figures show, giving them a market share of just over 20%. Goldman generated $961 million in revenue from its global M&A advisory. It also topped the rankings according both to deal value and advisory revenue in the U.S. In Europe, although it took the top position measured by deal value, it fell to fifth position according to advisory fee revenue, beaten by Morgan Stanley (MS), Rothschild, JP Morgan and Deutsche Bank AG (DB). In Asia Pacific excluding Japan, however, Bank of America Merrill Lynch topped the M&A ranking, according to value of deals, with a nearly 20% market share. UBS A.G. (UBS) topped the Asia Pacific ranking measured according to the M&A fees ranking, Dealogic says. For Japan, Nomura (9716.TO) dominated the rankings over the same period for both criteria.

The reputation metrics indicate that Goldman Sachs has retained its position at a cost. The Steel City Re Corporate Reputation Index™ ranking for the Company has dropped a net 9 percentile points over the trailing twelve months from the 98th percentile to the 89th percentile as shown in the top chart. Concurrently, the reputation rankings for the entire industry improved, as shown in the 4th chart, with little change in the inter-sector variance. Goldman Sachs' return on equity, in the top chart, and its fractional intangible asset value, shown in the last chart, reveal under performance by 19% and a persistent material loss of intangible asset fractional value.

When we last looked at the Company's metrics, we speculated that the equity markets were not appreciating the Company's value. With the benefit of hindsight, we see that the markets were underpricing the Company relative to its reputation ranking, but were nevertheless sensing real expected loss. A loss of pricing power. We interpret these metrics, in the aggregate, to suggest that Goldman Sachs has had to yield a bit on price. We believe customers want Goldman Sachs for their intellectual prowesss, but sense that they can squeeze Goldman on price. A bit, anyway. For now.  And so it goes.


RepuStars 2010 Sep 27

Nir Kossovsky - Monday, September 27, 2010

Weekly Reputation Index Metrics


At the close of trading 23 September 2010, the RepuStars and Repustars-II Composite Indices stood at 118.33 and 130.40, respectively. Over the past four weeks, the former Index has increased by 7.50%, while the latter has increased by 9.79%. The benchmark S&P500 Composite Index stood at 94.83 (rebased to 7 Jan 2005) and has increased over the past four weeks by 7.41%.

Since January 2009, the RepuStars and RepuStars-II Composite Indices have gained 32.90% and 55.03% respectively; the S&P 500 Composite Index has gained 20.72%. Other interval changes in the magnitude of the indices are shown below.

    

The RepuStars family of composite indices reflect the added value of reputation resilience. The RepuStars Composite Index comprises the two firms in each of 20 major sectors with the greatest periodic rise in their Steel City Re Corporate Reputation Index ranking sampled from the large cap segment of the U.S. equities market. Eligibility requirements are market capitalization >$3.5B, share price >$5.0, and reputation ranking between the 25th and 85th percentile. The RepuStars-II Composite Index selection criteria include market fundamentals. The benchmark metric is the S&P500 Composite Index. The Repustars indices are reconstituted biannually in the first weeks of January and July. Click here for additional information on the indices.

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 first Friday of every month or read the book, Mission: Intangible. Managing risk and reputation to create enterprise value, available at the IAFS Store or other leading online book retailers
2. Become a member of the Intangible Asset Finance Society and engage. At the very least, read our current (Fall 2010) Newsletter and learn more about us.
3. Join our community on Linked-In and stay in the information flow. 

Dominos: Serving volatility daily

Nir Kossovsky - Wednesday, September 22, 2010
Some people crave pizza. They obsess over it. OK, we admit to that weakness -- at least with respect to Dominos Pizza (NYSE:DPZ), a firm whose reputation metrics and economic performance do not jive well with our models. The good news for stakeholders is that DPZ over the trailing twelve months has outperformed the median of its peers by 62%. The unsettling news for us is that the Steel City Re Corporate Reputation Index ranking over the same trailing twelve months only moved up from the 42nd to the 43rd percentile among the 54 companies in this sector. Hardly a reputational advance befitting such fabulous financial performance.

This is how we explain it: volatility. Volatility in our 4-factor Index is a measure of how well a company gets its message across to stakeholders, and, conversely, how uniform of a picture stakeholders hold of the firm. As shown below, all of the reputation metrics, and the economic return metrics, speak to volatility. A lot of it.




Volatility counts against a firm's reputation by the Index. But with a net Index change over the trailing twelve months of a paltry one percentile and an economic gain, albeit volatile too, that is quite material, we are not satisfied with volatility alone as an explanation for the apparent discrepancy. This is especially true in light of the small variance in the reputation metrics within the Restaurant Group as a whole as shown in the fourth graph.

So, as we noted previously in June, we see a significant drop in intangible asset fractional value as shown in the last of five graphs. While the median intangible asset fraction is around 70% for the sector, Dominos is around 250% -- down from a peak of 450%. We therefore continue to interpret the gain in equity value as a function of a growth in tangible value (read, reduction in overwhelming debt). And that's a good thing for all which, we believe, will be recognized eventually leading to a rise in the reputation index -- an (unusually) lagging metric in this instance.

Heads Up - Quarterly News Update Posted

The Fall 2010 News bulletin is now live. Click here to read through and learn more about what is going on with our Society this fall.

RepuStars 2010 Sep 20

Nir Kossovsky - Monday, September 20, 2010

Weekly Reputation Index Metrics


At the close of trading 16 September 2010, the RepuStars and Repustars-II Composite Indices stood at 118.43 and 129.34, respectively. Over the past four weeks, the former Index has increased by 5.21%, while the latter has increased by 6.11%. The benchmark S&P500 Composite Index stood at 94.81 (rebased to 7 Jan 2005) and has increased over the past four weeks by 4.56%.

Since January 2009, the RepuStars and RepuStars-II Composite Indices have gained 33.00% and 53.77% respectively; the S&P 500 Composite Index has gained 20.70%. Other interval changes in the magnitude of the indices are shown below.

    

The RepuStars family of composite indices reflect the added value of reputation resilience. The RepuStars Composite Index comprises the two firms in each of 20 major sectors with the greatest periodic rise in their Steel City Re Corporate Reputation Index ranking sampled from the large cap segment of the U.S. equities market. Eligibility requirements are market capitalization >$3.5B, share price >$5.0, and reputation ranking between the 25th and 85th percentile. The RepuStars-II Composite Index selection criteria include market fundamentals. The benchmark metric is the S&P500 Composite Index. The Repustars indices are reconstituted biannually in the first weeks of January and July. Click here for additional information on the indices.

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 first Friday of every month or read the book, Mission: Intangible. Managing risk and reputation to create enterprise value, available at the IAFS Store 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. 

BP: FTSE4Good bids adieu

C. HUYGENS - Wednesday, September 15, 2010
This coming weekend, the good people who manage the FTSE4Good ethical investment index will show BP (NYSE:BP) the door. From 18 September, BP will be excluded from the index which many managers of ethical funds use to screen companies before including them in their portfolios. (BP is not a constituent member of either of the RepuStars composite indices.)

All we can ask is, "what took the FTSE so long?" Below, the Steel City Re Corporate Reputation Index ranking for BP and other reputation and intangible asset-related metrics. The pictures are worth thousands of words.


RepuStars 2010 Sep 13

Nir Kossovsky - Monday, September 13, 2010

Weekly Reputation Index Metrics


At the close of trading 9 September 2010, the RepuStars and Repustars-II Composite Indices stood at 116.33 and 126.3, respectively. Over the past four weeks, the former Index has increased by 4.43%, while the latter has increased by 4.52%. The benchmark S&P500 Composite Index stood at 93.09 (rebased to 7 Jan 2005) and has increased over the past four weeks by 1.90%.

Since January 2009, the RepuStars and RepuStars-II Composite Indices have gained 30.64% and 50.15% respectively; the S&P 500 Composite Index has gained 18.50%. Other interval changes in the magnitude of the indices are shown below.

   

The RepuStars family of composite indices reflect the added value of reputation resilience. The RepuStars Composite Index comprises the two firms in each of 20 major sectors with the greatest periodic rise in their Steel City Re Corporate Reputation Index ranking sampled from the large cap segment of the U.S. equities market. Eligibility requirements are market capitalization >$3.5B, share price >$5.0, and reputation ranking between the 25th and 85th percentile. The RepuStars-II Composite Index selection criteria include market fundamentals. The benchmark metric is the S&P500 Composite Index. The Repustars indices are reconstituted biannually in the first weeks of January and July. Click here for additional information on the indices.

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 first Friday of every month or read the book, Mission: Intangible. Managing risk and reputation to create enterprise value, available at the IAFS Store 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. 

Oracle: Larry's premonition.

Nir Kossovsky - Friday, September 10, 2010
There is little to add to the Silicon Valley soap opera that hasn’t been posted somewhere else recently. Here is a summary  of the more relevant facts relating to Oracle (NASDAQ:ORCL) and Hewlett Packard (NYSE:HPQ).

1. After a quarter century of working together closely, Oracle started competing with HP by selling computer servers with Oracle's $7.4 billion purchase of Sun Microsystems last year.

2. HP sued Hurd in a California court on Tuesday, a day after he joined Oracle. HP argues that Hurd won't be able to do his job at Oracle without spilling HP's trade secrets.

There is no shortage of colorful figures. At the top, though is Oracle CEO Larry Ellison, who recently shared his opinion of the HP board with this memorable letter sent to the New York Times 

The H-P Board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago. That decision nearly destroyed Apple and would have if Steve hadn’t come back and saved them. H-P had a long list of failed CEOs until they hired Mark who has spent the last five years doing a brilliant job reviving H-P to its former greatness. In losing Mark Hurd, the H-P board failed to act in the best interest of H-P’s employees, shareholders, customers and partners.


Mistakes are in the eye of the beholder, and in business, the overall impression is called “reputation.” We turn to the reputation metrics, courtesy of Steel City Re.

One month out from when HP dismissed Mr. Hurd, HP’s reputation metrics are sliding, and enterprise value is disappearing. After riding steadily at the 95th percentile in the Reputation Index ranking of its peer group, Computer Processing Hardware, HP is now in the 84th percentile. The exponentially weighted moving average volatility is climbing and both the trailing twelve week vector and velocity are materially negative. Not surprisingly, the company is underperforming its peers by 28%.



Oracle's reputation is not unblemished either. Rather than an uptick, Hurd’s arrival was associated with a material drop in the Reputation Index ranking and an uptick in volatility. But the equity markets appear to be tolerating the move, at least in the short term, with Oracle currently outperforming the median of its 110-member Packaged Software peer group by 2.4%. So Oracle is winning the reputation derby -- so far. But this is a soap opera, so stay tuned.

RepuStars 2010 Sep 6

Nir Kossovsky - Monday, September 06, 2010

Weekly Reputation Index Metrics


At the close of trading 2 September 2010, the RepuStars and Repustars-II Composite Indices stood at 114.99 and 123.9, respectively. Over the past four weeks, the former Index has decreased by 1.12%, while the latter has decreased by 1.66%. The benchmark S&P500 Composite Index stood at 91.90 (rebased to 7 Jan 2005) and has decreased over the past four weeks by 3.17%.

Since January 2009, the RepuStars and RepuStars-II Composite Indices have gained 29.15% and 47.30% respectively; the S&P 500 Composite Index has gained 16.99%. Other interval changes in the magnitude of the indices are shown below.

   

The RepuStars family of composite indices reflect the added value of reputation resilience. The RepuStars Composite Index comprises the two firms in each of 20 major sectors with the greatest periodic rise in their Steel City Re Corporate Reputation Index ranking sampled from the large cap segment of the U.S. equities market. Eligibility requirements are market capitalization >$3.5B, share price >$5.0, and reputation ranking between the 25th and 85th percentile. The RepuStars-II Composite Index selection criteria include market fundamentals. The benchmark metric is the S&P500 Composite Index. The Repustars indices are reconstituted biannually in the first weeks of January and July. Click here for additional information on the indices.

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 first Friday of every month or read the book, Mission: Intangible. Managing risk and reputation to create enterprise value, available at the IAFS Store 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. 


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