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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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Equifax Loses Trust, Reputation, and Revenue

C. HUYGENS - Friday, November 10, 2017
The going forward costs of reputation risk include lost revenues and extraordinary operational expenses.
“Nervous corporate clients are putting off signing new contracts until Equifax can assure them its systems are secure. Several have demanded IT audits. ‘We're hoping to win back their trust,’” said CFO John Gamble

Read more in Financial Times.

Read more on Trust.

Reputation Value Collapses as Trust Falls to Zero at Kobe Steel

C. HUYGENS - Thursday, October 12, 2017
#Reputation #risk at Kobe Steel over quality. In 48 hours, 40% equity fall; 500% credit default swap rise.

“…according to Atsushi Yamaguchi, an analyst with SMBC Nikko Securities…if it fails to demonstrate change in its corporate structure, Kobe Steel risks an exodus of customers and investors over the longer term’ he said.”

Read more in Financial Times.

More on reputation risk and quality.

Reputationally-impaired Benchmark Targeted

C. HUYGENS - Friday, July 28, 2017
Yes, a man-made product can have a reputation, and when that reputation--especially in financial services--is impaired, the product is likely a gonner. Consider the reputation of the benchmark rate, LIBOR,  now fatally impaired, and risking trillions of dollars in financial products. The LIBOR rigging…

“…scandal triggered $9bn fines for Barclays, UBS and Royal Bank of Scotland among others, and prison sentences for several traders. The lenders acknowledged that they had shifted the rates to boost their trading profits and to make their institutions seem healthier than they were in the financial crisis.”

Read more in the Financial Times.

Reputation of Global Economy Impaired

C. HUYGENS - Monday, May 29, 2017
US consumers’ trust deficit is permanent, expectations reset, #reputation impaired. #risk

As Allianz’s chief economic adviser Mohamed El-Erian puts it: “You cannot underestimate the economic and political effects of the profound loss of trust that the public has had in the core managers of the global system.” Rebuilding that trust would be the best kind of fiscal stimulus. But it will require heavy lifting.

Read more in the Financial Times.

Paying the Ongoing Costs of a Reputation Crisis

C. HUYGENS - Monday, May 08, 2017
#Reputation #Risk “Corporate names are resilient: when their images get damaged, a change of management or strategy will often revive their fortunes. But personal reputations are fragile: mess with them and it can be fatal,” wrote John Gapper for the Financial Times in August, 2016.

Wells Fargo is preparing to unveil new cost-cutting measures as the scandal-hit US bank tries to rebuild Wall Street’s confidence after a bruising annual meeting with shareholders.

Tim Sloan, chief executive, is this week expected to reveal plans for annual savings at Wells, the world’s third-biggest bank by market capitalisation, of as much as $3bn — on top of an existing $2bn expense-reduction plan.

Read more in the Financial Times.

Silicon Valley Reputation At Risk Over Trust

C. HUYGENS - Monday, May 08, 2017
Talk about emotionally-charged disappointment: “From terrorist content, sexism claims and trolls to mind-reading privacy invasion, unpaid tax and robots taking jobs, the charge sheet is growing rapidly. Technology executives risk attracting an opprobrium that is traditionally reserved for bankers.”

From terrorist content, sexism claims and trolls to mind-reading privacy invasion, unpaid tax and robots taking jobs, the charge sheet is growing rapidly. Technology executives risk attracting an opprobrium that is traditionally reserved for bankers. Stories have emerged of tech billionaires building bunkers in New Zealand to hedge against a revolt by the 99 per cent.

Until recently, the technology sector has been more trusted than any other. In the latest Edelman annual survey, 76 per cent of people trust technology companies, compared with about 60 per cent for most industries and 54 per cent for finance.

That trust underpins Silicon Valley’s economic miracle almost as much as the technology. The halo of pioneering innovation for the advancement of humankind — embodied by Apple’s “think different” slogan and Google’s “don’t be evil” motto (now abandoned) — makes consumers feel good.

Read more in the Financial Times.

Truth in Advertising

C. HUYGENS - Tuesday, October 01, 2013
Advertising can be a powerful contributor to better and more lasting relationships with consumers and other constituent groups, but it requires a new, creative approach to how it addresses truth. Jonathan Salem Baskin, moderator of the Mission Intangible Monthly Briefings, enumerates them:

(1) Get back to communicating functional benefits
(2) Stop pretending you’re talking in a vacuum
(3) Reaffirm the goal of getting people to like your product, not your ads
(4) Set expectations, not make promises

Reputation is a product of how expectations are set, and how they are met. Read more.

Boeing: In Fear of a BP Moment

C. HUYGENS - Sunday, July 14, 2013
On Friday, January 13, fire on an Ethiopian Airlines Boeing 787 at Heathrow Airport in London and a separate technical problem on a second 787 owned by Britain's Thomson Airways raised new questions about an aircraft seen as crucial to Boeing's future. Boeing said it had people on the ground working to understand the causes of the fire.

Have we seen this movie before? In the early days after the Deepwater Horizon explosion in the spring of 2010, then-BP CEO Tony Hayward provided this assurance. "I think the environmental impact of this disaster is likely to have been very, very modest." Trust us, he said, to get this under control.

For weeks, BP benefited from the doubt, and its image of environmental concern built up through a major investment in marketing and communications. Surely, a firm that is beyond petroleum will successfully protect the environment.

Of course, talking about protecting the environment while allegedly cutting back on investments in processes that actually protect the environment is a recipe for a modern-day reputational crisis. And so it came to pass that stakeholder disappointment in the eventual outcome, forced by reality trumping hope, was expensive for BP, its CEO, the board, and investors. (See detailed case study in Reputation, Stock Price and You.)

Enter Boeing, a highly reputable aerospace and defense manufacturer that has had a string of significant problems with the 787 Dreamliner, most recently being fires associated with the aircraft’s batteries. It is also a firm whose cost-saving strategy for 787 production produced a three-year delay, the ire of its unions, and allegations of cutting corners.

At the 20 May resumption of flights by United Airlines after the FAA-ordered stand-down, and nearly three years to the day after Hayward’s comments, Boeing CEO James McNerney said, “We are very sorry about the delay that was caused by some of the technology work-arounds that we had to implement. But,” he added, “the promise of this airplane remains unchanged. We are confident of that. More importantly, we are confident in the safety of this aircraft. Safety means everything to us. It’s in our DNA.” Trust us, he said.

“I trust Boeing that they know what they are doing,” said a Flight 1 passenger to Bloomberg. And the reputational value metrics, shown below as of Thursday, 11 July, affirm the return in trust. CRR, a measure of reputational value premium, is up. Current RVM volatility, a measure of consensus trend or stakeholder concurrence, is more favorable (down). So on Friday, 12 July, when another Boeing 787 caught fire, stakeholders were surprised. Equity investors registered their surprise by shaving 5% off the stock price. On Sunday, Bloomberg reports, In the early stages of the investigation, airlines said they would continue to fly their Dreamliners, while others confirmed they would stick to their plans to buy the aircraft. Jonathan Salem Baskin, Mission Intangible Monthly Briefing moderator, explains on CNBC how other stakeholders may respond to this latest surprise. Click here.

Google: Trying not to be evil

C. HUYGENS - Thursday, March 28, 2013
Ezra Klein, the editor of Wonkblog, a columnist at the Washington Post, and a contributor to both MSNBC and Bloomberg, has a problem with Google. He's not sure he can trust it.

Mr. Klein's an early technology adopter and at the vanguard of the horde that seizes opportunities afforded by new applications and then creates the buzz. Google needs people like Ezra to draw attention to their applications and drive consumption. The problem is that Google has built up a track record of creating free web services, drawing traffic, and then killing the products. It's their right, of course, but 'free' is a misnomer. Users invest considerable time and effort, and then rely on the service. When the benefits of the service are taken away, users feel cheated. In reputational parlance, there's an expectation mismatch that is now generating a new set of expectations: that Google will take away that which it first giveth. That's a reputational problem.

As Mr. Klein wrote recently in the Washington Post, "...the Gmail experience, the death of Google Reader, and the closure of Picnik all have me questioning whether I want to keep investing time and energy in “free” Google products or whether I need to start looking for paid services that are explicitly making money off the thing I am paying them to do."

The reputational metrics from Steel City Re show increasing RVM volatility -- the sort of pattern you'd expect from activity generated by a stakeholder community that is beginning to question its relationship with a company. RVM, as followers of this blog and as readers of Reputation, Stock Price and You know, is a non-financial measure of reputational value reported in Gerken units. It's current volatility, a 90-day exponentially weighted moving average of RVM volatility, recently spiked at 7% -- the threshhold value above which the relative risk of a market value loss of greater than 7.5% in the near future exceeds 1.0, according to the reputational consultants at Consensiv. Is it time to short Google? 

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