Category: Reputation Value

Can you afford to lose 20% of your Market Value?

china-stock-market-crash

A Corporate Crisis consumes most CEOs. Are you prepared for yours?

According to Oxford Metrica, a strategic advisory firm, every company today faces an 82% chance of experiencing a Corporate Disaster within any 5-year period.

They define a Corporate Disaster as an event that results in a company losing 20% of its Market Value.

So if you believe them – and they are a rigorous analytics company that is respected around the world, so I think you can – your company will experience a sudden and dramatic loss of your company’s Market Value in the near future.

According to another study by the Wharton School of the University of Pennsylvania, a sudden Stock Price drop is not just a short-term problem – it’s a long-term problem.

On average, it takes 80 weeks for a company’s Stock Price to recover after a sudden price drop – that’s 1½ years before the company’s Stock Price recovers to its original value.

If the Stock price fall is the result of Earnings Risk, recovery takes longer: 93 weeks.

If it’s the result of Acquisition Risk, it’s 121 weeks.

If it’s Industry Risk, it’s 137 weeks.

And if it’s Competition Risk, the recovery time is more than 3 years – or 162 weeks.

They also analysed the recovery time by risk, across industries, and the situation is much more extreme for the IT, Utilities and Healthcare sectors.

So the brutal conclusion is this:

  1. Your company will probably experience a Corporate Disaster that could result in a sudden 20% loss of Market Value, sometime in the next 5 years.
  2. After this event, it could take 1½ years on average for your Stock price to recover – maybe more.

Equilar calculates that the average S&P 500 CEO serves just 7.4 years in charge of their company – and just 6.0 years at the median.

So it’s likely that your imminent Corporate Disaster will dominate your tenure.

But recent research has shown how companies with strong Corporate Reputations are less affected by Corporate Crises, and recover from their Crises faster.

At Reputation, we advise listed Corporations how to prevent, prepare for and manage Reputation Risk.

If you are a CEO of a listed Corporation, and you would like to discuss the best ways to prepare for, prevent and manage Reputation Risks, please contact us via our website, or email us at Connect@TheReputationPartnership.com and we will reply, in total confidence, by return.

How much do you honestly think your Corporate Reputation is worth?

978374_origRecent Financial Analysis has finally been able to prove that your Corporate Reputation really is your most priceless asset

We’ve all read the cliches and quotes that tell us how important your reputation is, and how easy it can be destroyed.

Everyone’s done it.

From Socrates to Henry Ford to Warren Buffet to Richard Branson – they’ve all given us beautiful quotations about the importance of Reputation, without any facts whatsoever to support it.

But new research has identified the true value of Corporate Reputation for the first time.

And the conclusions are extraordinary.

The True Value Of Your Corporation Is Bigger Than You Ever Imagined

A series of recent studies have analysed all the components of Market Capitalisation on the S&P 500, the FTSE 100 and the FTSE 250 – and their findings are extraordinary:

  1. In their 2016 study of the S&P 500, Reputation Dividend found that Corporate Reputation accounted for a massive 21% of Total Market Capitalisation, or a staggering US$3,977 Billion of Market Value.
  1. In their 2016 study of the FTSE 250, the results were even more extreme, with Corporate Reputation accounting for 25% of Total Market Capitalisation – or £91 Billion of Market Value.
  1. In the same study, they found that Corporate Reputation accounted for an incredible 38% of Total Market Capitalisation on the FTSE 100 – creating £702 Billion of Market Value.

The results varied by industry and Stock Market – but in every case Corporate Reputation accounted for a dramatic proportion of Market Value.

On the S&P 500, Corporate Reputation accounted for more than 15% of Total Market Capitalisation in several Industries, including: Telecommunications, Oil & Gas, Financial, Technology and Industrials.

On the FTSE, the same sectors were equally influenced – as were Consumer Goods, Healthcare, Utilities and Consumer Services.

The study also found that an improvement in Corporate Reputation leads directly to an increase in Stock Price.

On the S&P 500, an 5% improvement in Corporate Reputation yields a 2.5% increase in Market Capitalisation. On the FTSE it creates an increase of 2.2% in Market Capitalisation.

That would result in an increase in Market Value of approx. US$600 million for the average-sized S&P 500 company, and US$500 million for the average-sized company on the FTSE.

How much of your company’s Market Value is created by your Corporate Reputation?

And are you doing enough to increase it?

At Reputation, we advise CEOs of listed Corporations how to build and protect a Corporate Reputation that creates Corporate Value.

If you are a CEO of a listed Corporation, and you would like to discuss the best way to build the Financial Value of your Corporate Reputation, please contact us via our website, or email us at Connect@TheReputationPartnership.com and we will reply, in strictest confidence, by return.