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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Research Reveals Major Flaw in Public Company Risk Disclosure

C. HUYGENS - Tuesday, September 10, 2013
Huygens is pleased to share notice of a new study on reputation risk.

Beginning in 2005, the SEC mandated firms to include a “risk factor” section in their Form 10-K (Item 1A) to discuss “the most significant factors that make the company speculative or risky.”1 This suggests that regulators believe that investors benefit from disclosures about firm risk and uncertainties. In parallel, directors and senior executives have been disclosing in the business literature the primacy of reputation as a source of market valuation. In this study, we examine the information content of the disclosure of risk to reputation and its relationship to corporate performance. We observed four different correlations with disclosure of risk to reputation among constituents of the S&P500 composite equity index. When analyzed as a homogenous group, we found no material difference between Reputation risk Disclosers and Non-Disclosers with respect to almost every equity, dividend, asset or reputation measure. However, when the groups were stratified by sector, three correlations emerged. In the Energy sector, Disclosers outperformed. In the Information Technology sector, Non-Disclosers greatly underperformed. Last, in the Consumer sector, Disclosers underperformed. We conclude that there’s little correlation between reputation risk disclosure and materiality to performance. When there is a correlation, it often contradicts presumptions that greater risks are reflected in lesser or more volatile performance (it’s not). Therefore, reputation risk disclosure in Form 10-K Item 1A is not a reliable indicator upon which investors can base buy or sell decisions.

Read the full study here.

CRM Redefined: Customer reputation management

C. HUYGENS - Friday, September 06, 2013
In some circles, conversations on the notion of reputation are undergoing lexicographic upgrades. For example, the psychological notion of expectation which is the framework Huygens prefer, is being framed in sociological terms as an implicit social contract between a company and its stakeholders. No matter. A contract comprises an implicit expectation of performance and a penalty for a breach. The conceptual model works well.

Fast forward to customer relationship management, and that concept is now undergoing a face-lift, too. The Consensiv blog calls out this story: Mike Muhney, the co-inventor of one of the customer relationship management, or CRM software programs that lets companies track the in and outflow of activities that “touch” customers, notes that only half of the companies using such tech tools gain any significant return on their investment. The problem, as he explained in an article in Wired earlier this month, is that users should think of “relationships” as the sources of “reputation.” Read more.

Labor Day Musings on Reputation

C. HUYGENS - Monday, September 02, 2013
Huygens has friends, and when he elects not to work on the day set aside to not work in honor of working, he takes pride in knowing that others are celebrating the day working in honor of those who are not working in their honor. Under such circumstances, it is only fitting and proper that their labor be further honored with the following links:

From Consensiv, and IAFS MIMB moderator Jonathan Salem Baskin, Labor’s Reputational Value.

From Reputation Xchange, and authority Leslie Gaines-Ross, State-ly Reputations.

Blackberry: The end is nigh

C. HUYGENS - Friday, August 30, 2013
Earlier this month, Huygens doubled down on his belief that Blackberry was doomed. The death knell is ringing, and it sounds like this. From Bloomberg, Aug 30, 2013, "Morgan Stanley (MS) is holding off on upgrading its employees to BlackBerry Ltd. (BB)’s newest smartphones and operating system because of concerns that the Canadian company may not back its platform long-term, according to two people with knowledge of the bank’s plans."

Blackberry, nee Research in Motion, is in the last stages of a full-blown reputational crisis. Such a crisis, as Huygens frequently declares, is the realization of reputation risk which is defined as the threat to enterprise value when myriad stakeholders perceive that corporate behavior violates their expectations. Morgan Stanley would expect Blackberry to support its platform long-term; it is now expecting that the company will be unable to do so.

As to last stages, as Huygens is formerly a deputy coroner of Los Angeles county, the situation is ad oculos.

Reputation: An operational risk perspective

C. HUYGENS - Wednesday, August 28, 2013
When Dutch accountant Marinus de Pooter wrote about managing the risks of failing to meet business goals and stakeholder expectations in the April edition of Internal Auditor, he never used the word reputation…but articulated 10 ways to control and improve it. Read more.

Reputation: Expectations need to be managed

C. HUYGENS - Sunday, August 25, 2013
In an essay in Forbes magazine, Mission Intangible Monthly Briefing moderator Jonathan Salem Baskin, Managing Director of Consensiv, a provider of reputation controls, explains why managing expectations is an important element of reputation value creation and protection. Read Batman, Ballmer, And The Dangers Of Expectations.

Social Media: Building brands but reflecting reputations

C. HUYGENS - Thursday, August 22, 2013
Many experts conflate definitions of “reputation” with those of “branding,” which usually leads to claims that communications strategies and tools are the mechanisms for creating and managing reputational value. They've got it wrong.

Brands are mental constructs of promises and associations among consumers, reputations are objective measures of ongoing reality and future expectations among a diverse collection of company stakeholders. The tools for controlling corporate reputations and risk are the standard tools of operational control coupled with the tools of stakeholder expectation management.

Social media can help to the extent that brand promises are among the influencers of stakeholder expectations. Read more here.

Blackberry: No more children's games

C. HUYGENS - Wednesday, August 14, 2013
From time to time, Huygens has to turn his back on his alma mater, the great University of the great Chicago, and acknowledge that markets can be profoundly inefficient. Equity prices are often driven by emotion; reputational value metrics are usually driven by rational expectations of a diversity of stakeholders that by virtue of their heterogeneity, dampen the emotional noise.

Equity investor emotion manifests in frankly goofy stock prices. For example, writes Value Walk, “Netflix has had a hell of a run in 2013, up over 170% year-to-date on big earnings results and short squeezes...But that run for Netflix, Inc. (NASDAQ:NFLX) stock might end in tears, and soon.” Driving a stock price to 329 times earnings suggests that investors are acting on sentiment more than fundamentals.

Turning to Blackberry (BBRY), Huygens has long advocated laying out the cutlery. The reputational value metrics were unambiguous two years ago. Well BBRY had another stock burst after it renamed itself (adult version of peek-a-boo) but that's over now and directors are seriously talking like adults about selling off the assets. Here are the most recent Steel City Re reputational value metrics.

The current tally: current reputational value (RVM) volatility in the top quintile (88th percentile measuring in at a Consensus Trend above 11% - change is coming. Reputational ranking, the Reputation Premium, at the 19th percentile - low expectations (finally) after an irrationally optimistic run in the high 60's that fueled silly economic returns approaching 150%.



Reputation is the (Academic) Word

C. HUYGENS - Tuesday, August 13, 2013
Events manifest in clusters. Recently, News Corp went through a painful transformation as the final stage of a reputation crisis centered around senior executive Rebekah Brooks and "over-the-top" phone hacking. Rewinding, it turns out that around the time that Rebekah Mary Wade Kemp Brooks was evolving her campaign to name and shame alleged pedophiles through News of the World across the pond -- the noble origins to the practice that got out of control -- a pedophile was sowing the seeds of a reputational crisis at the Pennsylvania State University.

When the scandal became public in 2011, it unleashed a cathartic conversation on a difficult subject that had touched surprisingly many people first-hand. The deeper questions were: How does an institutional culture arise to condone, or at least ignore, something that, individually, every member knows is wrong?31 How does one persist as a “perfect serial pedophile,” as the prosecution described Jerry Sandusky, the former Pennsylvania State University assistant football coach now convicted of molesting young boys.

In a blog note posted today, Jonathan Salem Baskin, better known to Society followers as the moderator of the Mission Intangible Monthly Briefings, reflects on reputation in academia. Read more.

Reputation: It's about behavior, stupid!

C. HUYGENS - Thursday, August 08, 2013
As legend goes, the accidental marriage of chocolate and peanut butter produced a diversity of wonderful confectionary offspring. Each, a virtue on its own, produced in combination a superior experience.

The same can not be said about the marriage of branding and reputation. Branding, and the research that drives its understanding, is about awareness, likeabilty, emotional connection, and the elusive brand promise. It is an artifact of an overt communication campaign.

Reputation is about rational expectations. It is a psychological construct formed through a diversity of observations ranging from products of overt communications to directly observed behaviors, rumors, and innuendos.

Each a valid business construct that has implications for goals, resources and strategy, in combination they yield indeterminate goals, wasted resources, and unintelligible strategy that leaves nobody happy - not even Miley Cyrus. Read More.

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