RISK MANAGEMENT
Media Monitoring Plays Role
In Managing Reputation Risk
Social media efforts can
come back to haunt a company.
Earlier this year, McDonald’s
launched a campaign to promote
the quality of its ingredients,
using the Twitter hashtag
#McDStories, only to see the
clickable link hijacked by animal
rights activists and other critics
of the company. McDonald’s
ended up pulling the hashtag.
As businesses shepherd their
brands in an increasingly volatile
media environment, more are
turning to services that track
what is being said about them.
Companies need help in
this area, says Anthony John-
drow, managing partner at the
Global exchange operator
Nasdaq OMX recently launched
a service that helps monitor and
manage companies reputation.
It joins an already crowded mar-
ketplace, including offerings such
as the Factiva media-monitoring
services.
Nasdaq’s service, Media Intelligence, provides real-time monitoring and evaluation of print,
online, broadcast and social media
mentioning a company’s brand.
It tracks more than 50,000 online
news outlets, 3 million social media sources and 1,000 broadcast
and print outlets in more than 80
countries, and uses a technique
called advanced natural language
processes to analyze the tone of
references to the company.
Nasdaq’s platform also allows
Twitter users to engage directly
with influential social media
individuals, as identified by online
analytics tools such Klout.
For companies seeking metrics
to measure their reputation capital, Johndrow suggests tracking
the performance of intangible
assets, found by subtracting the
company’s book value from its
market capitalization.
The difference “is the value of
the company’s intangible assets,”
he explains. “It might include as-
sets like intellectual property, but a
company’s reputation accounts for
quite a bit of it.”
By measuring the change be-
tween the two values and compar-
ing it with competitors’ values, a
firm can turn an ethereal concept
like a reputation into a measurable
and manageable performance
metric, Johndrow says.
Challenges for Derivatives Users
Hedge effectiveness testing beat out risk assessment as the biggest challenge cited by
corporate users of derivatives, according to a survey conducted by financial analytics
technology vendor FINCAD.
Hedge effectiveness
Accurate risk assessment
Transparency in financial
reporting
Independent pricing/valuation
Other
0
28%
26%
22%
19%
4%
5
10
15
20
25
30
Source: FINCAD
BENEFITS FINANCE
GM Cuts
Pension
Obligations
The news General Motors is
downsizing its pension obligations
is likely to inspire similar moves
by other companies, experts say.
“This is going to set off a trend
that sees a lot of the other jumbo
plans explore this option more
fully,” says Ramy Tadros, partner
and head of the Americas insurance practice at Oliver Wyman.
GM says it will reduce its pension liabilities by $26 billion by offering lump-sum buyouts to some
salaried retirees and providing
others with monthly payments via
a group annuity from Prudential.
In March, Ford said it will offer
lump-sum buyouts to retirees and
former employees not yet retired.
These moves come as the markets continue to erode plan funding. Mercer estimates that at the
end of May, S&P 1500 companies’
plans had an aggregate funded
ratio of just 76%.
Which companies are likely to
follow GM’s example? Those with
“pensions that are outsized rela-
tive to the size of the business,”
says Scott Campion, a senior
manager at Oliver Wyman. “And
better-funded pension plans are
easier to terminate than worse-
funded plans.”
Plans with a higher proportion
of retirees to active employees are
better candidates because insurers
would charge more for an annu-
ity for a plan with more active
employees, Campion says.
