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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Reputational Impact of Responsible Behavior

C. HUYGENS - Thursday, July 27, 2017
What regulatory reputational resilience looks like according to SEC Chairman Jay Clayton in the context of cyber security:

“If a company is being responsible . . . I don’t think we should then be punishing them for being a victim..."

Read more in the Financial Times.

Doubt is the Face of Reputation Risk

C. HUYGENS - Thursday, July 20, 2017
In early July, international health insurance giant Bupa confirmed an employee had stolen data relating to 547,000 clients and was trying to sell it online. Reputation risk as a possible consequence of the cyber event.

“A cyber breach [including employee theft of computer data] does not necessarily damage an institution’s reputation,” Kossovsky said. “Reputation risk is the risk of leaving stakeholders disappointed and emotionally charged... (a)nd doubt, of course, is what reputation risk looks like.”

Read more in the Insurance Business.

Measure of the Reputation Crisis at Uber

C. HUYGENS - Monday, June 19, 2017
Cornerstones of #reputation—ethics and security— and weaponized social media exacerbate #risk per Steel City Re.

Uber’s annual growth in the US slowed to 40 per cent at the end of May, from 55 per cent in the previous year, according to the data from Second Measure.

An onslaught by San Francisco-based Lyft, is taking its toll, with Uber’s US market share dropping from 84 per cent at the beginning of this year to 77 per cent at the end of May, according to data from Second Measure, a research firm that uses anonymised credit card data.

Uber’s decline in market share was fuelled by the #DeleteUber campaign at the end of January, which encouraged users to stop using the company due to Mr Kalanick’s role on President Donald Trump’s business advisory council. The campaign hit hardest in New York, Boston and San Francisco, some of Uber’s top 10 US markets.

Read more in the Financial Times.

Expectations for Cyber Security

C. HUYGENS - Saturday, May 13, 2017
Reputation risk results from emotionally charged disappointment brought on by perceived failures in ethics, innovation, quality, safety, sustainability and security. Patients and regulators expect reasonable security; known vulnerabilities create #reputation #risk. Use NIST 800-53.

Authorities around the world are scrambling to tackle one of the most virulent cyber attacks to date, as fears mount over the safety of huge amounts of sensitive data, ranging from medical records to corporate databases. Hospitals across the UK have been severely disrupted; postal delivery and logistics services hit in the US and university networks in China shut down. Some of Europe’s biggest companies have been affected, including Telefónica, the Spanish mobile phone giant, Deutsche Bahn, the German national railway operator and Renault, the French carmaker. Russia’s interior ministry said more than 1,000 of its computers had been taken offline.

Read more in the Financial Times.

Home Depot: Data breach v. dog bites man

C. HUYGENS - Monday, September 29, 2014
In early September, Home Depot, the home improvement chain confirmed that its payment systems had been hacked. The full extent of the breach appears to be around 60 million records. It is the largest retail breach on record eclipsing Target's 40 million records last year, and naturally, litigators and regulators have started their investigations.

Something however is amiss. You look at the way reputation value metrics responded to the Home Depot data breach and you'd have to say they reek of complacency. There's hardly a blip. It seems that a data breach no longer has the ability to shock stakeholders, who by the look of things, no longer expect credit card information to remain secure. Thus, in a rather short span, it appears that cyber security risk has been downgraded from a reliable trigger of reputational value losses to a mere source of embarrassment, consternation, and operational loss. Dog bites man, yawn.

Security: Haskell makes the ephemeral real

C. HUYGENS - Monday, July 14, 2014
Amongst all the chatter about reputation and intangibles, one would be tempted to relegate its importance to a category that includes inventorying angels atop  pins. Security, one of the six pillars of reputation, is the most ephemeral. Yet in a flash, the concepts of reputation and security can become real and deadly.

Reputation is an expectation of behavior. Ronald Lee Haskell had a somewhat established reputation for violence involving family members. Haskell is now is charged with having executed six members of his ex-wife’s family. Read more.

Google: Reputation is a Drag

C. HUYGENS - Thursday, January 02, 2014
Earlier today, two articles appeared at Ad Age and CFO commenting on the widening impact of stakeholder attention to data privacy. The general message is that stakeholders are becoming resistant to releasing data for free. The specific message is that companies once trusted to "do the right thing" with those data, or at least not do evil, are experiencing reputation "issues" that are creating a drag on value.

From Ad Age: ...there's a growing body of thought and tools to protect, or at least impede, the collection of personal data. You can run plug-ins on your browser to throw random data at collectors; extensions that reveal who's tracking the sites you visit (and block them); and mobile apps to jam location identifiers. Expect more innovation on this front next year, along with more vocal advocacy in support of it. There's even big money somewhat inadvertently behind the issue: Microsoft has elected to make privacy a differentiator in its marketing against Google, at least for now.

From CFO.com: In its third quarter 2013 financial results, Google reported its eighth consecutive decline in price per click, the money it can charge advertisers. But what’s worrisome is that this eight percent year-over-year loss in pricing power for its core business, a symptom of reputational value loss, is associated with other signs of stakeholder disaffection.

Huygens commented on Google in March, months ago, suggesting a looming drag on value when the stock was soaring; do the reputation metrics bear out these predictions at this time?

The Consensiv reputation metrics, powered by Steel City Re's measures of reputational value, reflect stakeholder expectations and their economic effects. Of the 136 firms in its sector, Internet Software and Services, Google has held on to the highest value of the metric, Reputation Premium. But as of late, there has been a bit of volatility. This appears a subtle dip of the Reputation Premium. More obvious is the corresponding indicator that Its stakeholders are slightly less confident that this premium evidenced by an onging rise in the Consensus Trend metric to 1.3%.  The Consensus Benchmark,which is based on a one-year average standard deviation of the Reputation Premium, even at 9.1% indicates a less volatile course than most of its peers. This is what early cracks in the reputation veneer look like, and it helps explain why Google completely dropped off the December Consensiv 50 reputation value league table.



For more background on the Consensiv reputation controls, click here. To view the December 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here. Last, to read more about how reputational value is linked to stakeholder expectations and enterprise value, read, Reputation Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012) (click here).

Target: In the cross hairs

C. HUYGENS - Monday, December 23, 2013
Last Thursday, Target (TGT), the nation's second-largest discounter, acknowledged that data connected to about 40 million credit and debit card accounts was stolen as part of a breach that began over the Thanksgiving weekend (Read more). In a discussion on the security breach, reputation experts Nir Kossovsky and Jonathan Salem Baskin shared these thoughts with the Pittsburgh Post Gazette (Read more):

"Time will tell how significant a hit the incident will be to Target's reputation and sales. Bad events don't necessarily trigger a loss of reputation, said Nir Kossovsky, chief executive of Steel City Re, a Downtown-based insurer of corporate reputational value. The impact will depend on whether customers believe the company took reasonable actions and whether they hold the hackers, rather than Target, culpable for the breach, he said. "Bad news headlines sting, but it's only a reputation problem if people behave differently because of it," said Jonathan Salem Baskin, managing director at Consensiv, a reputation management firm in Chicago.

Do the metrics bear them out?

The Consensiv reputation metrics, powered by Steel City Re's measures of reputational value, reflect stakeholder expectations and their economic effects. Of the 15 firms in its sector, Discount Stores, Target has generally hovered around the third quartile of the metric, Reputation Premium. Its most recent value, however, was the 57th percentile. Target's bullseye is a black eye of sorts - not necessarily permanently or even long-term, but the hit registered. Its stakeholders are slightly less confident that this premium is appropriate as evidence by a slight, almost imperceptible, rise in theConsensus Trend metric 1.3%.  The Consensus Benchmark,which is based on a one-year average standard deviation of the Reputation Premium, indicates at 4.0% a far more stable course than its peers.

The data suggest that while shaken, stakeholders are probably going to forgive Target and move on. The company, in their minds, is good; it's the hackers that are miscreants.



For more background on the Consensiv reputation controls, click here. To view the November 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here.

Cyber Extortion Raise Eyebrows

C. HUYGENS - Sunday, September 29, 2013
The virtual world is no utopia. Even in the fantasy world of Woody Allen, as depicted in the film, Sleeper, where cloning is a reality, the only remnants of a blown-up leader -- his nose -- can be taken hostage. It is even worse in the cyberworld,.

As Security Management described the discussion on the Society's Mission Intangible Monthly Briefing Friday, 20 September, "companies need to take extra care to protect their information from being compromised," said program guest David Glockner. Disclosure is key to reputation management.

When an incident does occur, added Glockner, companies need to be open about it, which he noted companies are getting better at, as states have enacted regulation calling for disclosures and as society continues to embrace technology. “As companies see themselves as no longer alone in addressing cybersecurity issues, I think they become more comfortable talking about it…and realizing that if it’s going to come out…maybe you’re better off getting ahead of the problem.”

According to Security Management, "These types of crime have become the most common complaints that the FBI received in 2012, with 289,874 complaints total for the year, averaging more than 24,000 complaints per month, according to an FBI press release announcing the 2012 Internet Crime Report issued in May 2013."

Booz Allen: Stunning display of reputational resilience

C. HUYGENS - Monday, June 24, 2013
On June 9, a 29-year-old computer technician, Edward Snowden, revealed himself to be the source of news stories showing the extent of phone and Internet eavesdropping by the National Security Agency. Snowden leaked classified documents he loaded onto a thumb drive while working for Booz Allen Hamilton (BAH), a major contractor, at an NSA listening post in Hawaii.

It is an ongoing event not unlike the London Whale or dozens of other rogue employees in remote stations away from the head office who've made headlines these past few years through unsanctioned behaviors. Usually, the consequences have been a loss of money. Occasionally, the parent firm goes belly up; e.g., Barings.

Snowden's document release is a major security breach. It’s been suggested that the fallout may lead to significant changes in intelligence contracting. At the very least, Booz Allen might be expected to suffer financial damage. Its primary customer, the US Intelligence Community, has reason to develop trust issues.

No worries, writes Bloomberg/Businessweek. Expectations are that little will change. "…conversations with current and former employees of Booz Allen and U.S. intelligence officials suggest that these contractors aren’t going anywhere soon. Even if Snowden ends up costing his former employer business, the work will probably just go to its rivals...As much as contractors such as Booz Allen have come to rely on the federal government, the government relies on them even more."

The Steel City Re reputational value metrics affirm the qualitative assessment. While the volatility of the RVM, a non-financial measure of reputational value, is up from the 6th percentile to the 25th percentile among the peer group of 173 commercial service firms, its direct measure of uncertainty and reputational risk, the current RVM volatility is still less than 2%. As Consensiv, the consultancy explains, this metric, also known as the ConsensusTrend, is "first and foremost an indicator of risk, as companies with CT measures in excess of 7% are on average at a statistically greater risk of an adverse equity market event (i.e., a market cap loss of 7.5% or more) in the going-forward 12 months. It also provides feedback on the effectiveness of recent operations and communications efforts." In short, no one is expecting any major changes.

In other matters, the astute observer will note that BAH's current CRR rank, an indication of relative reputational value, is only at the 38th percentile having been closer to the 60th percentile before the leak was tied to Booz Allen. The more careful observer will note that Booz's CRR dropped three days before the revelation on 9 June. Perhaps being in the spy business, its stakeholders also have alternative channels for obtaining news?


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