February 21, 2018

HSBC has warned that it could pay at least $1.5bn in penalties over alleged tax evasion and money laundering at its Swiss private bank, casting a shadow over Stuart Gulliver’s final day as chief executive. The estimate underlines how the outgoing HSBC boss has struggled to get to grips with the string of scandals thrown up by a number of ill-judged acquisitions dating back to before he took over in 2011.

February 21, 2018
Financial Times

The value of reputation risk due diligence in M&A should not be underestimated.

HSBC Acquires Reputation Risk with 19-Year Latency. The value of reputation risk due diligence in M&A should not be underestimated. “In 1999, HSBC acquired Republic (which appears to have) helped thousands of rich clients to carry out industrial-scale tax evasion and avoidance.”

Reputation risk: peril of stakeholders’ disappointment and anger.

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?