January 2, 2011

“Nir Kossovsky, founder of Steel City Re, has argued for such a strategic and holistic approach to intangibles. In his framework a company’s intangibles include its processes for producing safe, high-quality, innovative, ethical and sustainable products and services. A company’s reputation is the sum total of stakeholders’ perceptions of how the company manages those intangibles.
Starting from the premise that what cannot be measured cannot be managed, Steel City Re has developed a quantitative measure of reputation. That measure – the Steel City Re Reputation/Intangible Asset Index – uses forward-looking equity market-based measures of various stakeholders’ assessments of the company. Specifically, the index incorporates proxies for customers’ views, suppliers’ views and investors’ views. In addition, a measure of the company’s effectiveness at communicating its actions and intentions is included. Taken together, these parameters produce a percentile ranking of companies’ reputations – that is, the aggregate view of stakeholders as to how effective each company is at managing its intangibles.”

Deutsche Bank
January 2, 2011

“These parameters produce a percentile ranking of companies’ reputations – that is, the aggregate view of stakeholders as to how effective each company is at managing its intangibles.”

Reputation value: economic benefits of stakeholders’ expectations.

Reputations are valuable strategic intangible assets. Threats to these assets⏤ enterprise reputation risks, often mislabeled “brand risks” ⏤ need to be managed, and management needs to be overseen through reputation risk governance lest reputational damage or reputational harm result in long-tailed go-forward losses in economic value and/or political power. Because these intangible risks arise from the interplay of stakeholder expectation, experiences, and media amplification, parametric insurances for intangible asset risks, for reputational value, for reputational harm, and for reputation assurance help mitigate risk by telling a simple, convincing and completely credible story of quality reputation governance to stakeholders. This story telling effect is the expressive power of insurance complementing insurance’s better known instrumental power of indemnification.

Risk management, risk financing in insurance captives, and risk transfer through reputation insurances comprise the constituent elements of a comprehensive solution.

What’s your strategy?