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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Plaintiffs Pursue Asymmetric Strategies Targeting Reputation

C. HUYGENS - Wednesday, September 06, 2017
Reputation is an existential asset in financial services; plaintiffs have asymmetrically leveraged reputation risk against money managers.

“Large, and in most cases, household name money managers face a unique reputation risk when their 401(k) plans are sued for offering their own investments, says Brian Netter, co-chair of the ERISA litigation practice at Mayer Brown.”

Read more in Benefits Pro.

Reputation Now Key at Consumer Level

C. HUYGENS - Thursday, August 24, 2017
Reputation risk is a material threat to value especially in financial services, automotive and healthcare.

"CorpSumers feel so strongly about brand reputation, that over half (51%) will continue buying a product that has disappointed them because they believe in the company or share its values."

Read more in Holmes Report.

Wells Fargo Drops Yet Another Shoe

C. HUYGENS - Friday, August 04, 2017
Reputation risk cost is often high because of losses initially not visible, like the submerged mass of an iceberg.

“Wells Fargo said that the number of fake bank accounts set up by its staff could be significantly higher than previously thought and warned investors that it risks further regulatory investigations into a new scandal over car insurance.”

Strategies to convince stakeholders there isn't an iceberg just below the surface—which will work as long as the assertion is true—include warranties on governance and related transparent financial products.

Read more in the Financial Times.

Wells Fargo Digging Deeper Hole for Board

C. HUYGENS - Sunday, July 30, 2017
Senator Warren calls (again) on Fed to remove Wells Fargo board members, report Reuters, after The New York Times reported Friday that more than 800,000 Wells Fargo customers were charged for auto insurance they did not request. Activists such as Scott Stringer, who oversees public pension funds that hold roughly 11.6 million Wells Fargo shares, wants a new Chairman at least.

In a letter sent Friday to Yellen, Warren, a Democrat, said the recent revelation of more improper charges at the bank indicates "deep risk management problems," and called for the removal of all board members who served from 2011 to 2015, when the activity reportedly occurred.

The question stakeholders must be asking is "exactly how big is that iceberg of unethical behavior that has not yet been disclosed?"

Until Wells Fargo can authentically communicate to stakeholders that all that is being disclosed now comprises "sins of the past," they will continue to be on a downward reputational spiral. And with the battle over regulatory controls looming in Congress, as Kate Berry reports in American Banker, the bank's risk of further reputational damage with regulators is undercutting its objective of eliminating the CFPB.

Read more in the New York Times.

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: Sentiment Can Become Reality

C. HUYGENS - Friday, May 26, 2017
Financial services is a lot about confidence—if there are any cracks, it can result in contagion.

The back story: Home Capital (TSE:HCG) experienced a run on the bank, more formally known as a liquidity “issue.” Dave McKay, CEO of Royal Bank of Canada told the Financial Times, “There wasn’t a credit reason to drive the liquidity challenges that Home Capital faced, but more a lack of confidence.”

It is an explanation, but not necessarily a source of reassurance.

“I don’t think you can conclude that even though they [Home Capital] are 1 per cent of the market, it won’t have an impact,” said James Shanahan, analyst at Edward Jones. “The problem is that sentiment can become reality. Financial services is a lot about confidence. If there are any cracks in confidence, it can result in contagion."


Read more from the Financial Times:

Paying Down the Costs of a Reputation Crisis

C. HUYGENS - Tuesday, May 09, 2017
More going-forward costs of #reputation #risk -- now burning furniture.

San Francisco-based bank Wells Fargo & Co. is considering selling its insurance brokerage unit for about $2 billion, Bloomberg reported Tuesday.

Citing “people familiar with the matter,” Bloomberg said Wells Fargo is contacting private equity firms to determine the interest in Wells Fargo Insurance Services USA Inc. The bank is planning to move forward with a sale, Bloomberg reported, but it hasn’t set a timeline for holding a formal auction, one of the people said.


Read more in the Business Insurance.

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.

Wells Fargo: Legal Bills Pile Up

C. HUYGENS - Friday, May 05, 2017
#Reputation #risk Entry level losses based on 6000 events average 24% market cap, 13% sales, and 12% net income. Values vary by industry sector, year, and underlying causes.

Wells Fargo has warned its litigation bill could be $200m higher than previously thought as the US bank sheds new light on a series of lawsuits it is facing over the bogus account scandal.

In a quarterly filing on Friday, Wells said “reasonably possible” losses from legal actions against it could exceed its existing provisions by $2bn — up from a $1.8bn figure it disclosed three months ago.

The document shows how lawsuits are piling up against Wells after thousands of its employees, under pressure to hit sales targets, turned to fraud. Workers signed up as many as 2.1m customers for cards and accounts over several years without their authorisation or consent, in some cases faking signatures.


Read more in the Financial Times.

Citi: Opportunity for enterprise risk management grand slam

C. HUYGENS - Wednesday, September 03, 2014
Other than BNP Paribas, which is actively struggling with serious compliance issues and reputation damage, the large banks appear to be stabilizing. Jonathan Salem Baskin of Consensiv, writing for Forbes, notes that for a financial conglomerate such as Citi, stability is a misnomer -- its very essence is a conflict of narratives.

"Citi’s brand possesses at least four major attributes, by my accounting, and each comes with varying degrees of credibility and meaning: Evil lender, reward points-giver, 200 year-old company, and friend to small business. If it could express them as an integrated, coherent whole, it would be a branding grand slam."

The value of Citi's integrated coherent whole, that is to say, its reputational value, is much better than it has been in the past, but it is still relatively dynamic with at least around $14.3B in play (~10% of market cap) over the trailing twelve months.

"Figuring out how to weave together at least four of its brand attributes would be a grand slam," affirms Baskin. If it could transform that collective reputation into a stable source of value, it would be an enterprise risk management grand slam.


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