Wednesday, April 12, 2017

Rites of Passage and Reputational Risk Examples

Welcome back to me.  I've neglected this blog for many months, as other activities ate my time.

I will try to do better going forward.

Seattle had a hard winter and and is still in the midst of a cold and rainy spring.  I chalked up two long rounds of bronchitis, then took a fall that hurt my back.  I'm 90% back now, and the possessor of a Teeter inversion board from which I can hang upside down three or four times a day.

 I've been walking more and working again with my personal trainer twice a week.  Through the winter and into the spring, I've continued to teach my classes and interact with my students.

This quarter I'm teaching an introductory operational risk and information seminar.   We have a court-side seat to any number of operational risks, but the one I'm amazed by this week is reputational risk.  United Airlines has once again managed to get featured on social media (the video) and traditional journalism as well.  When we think about why we're upset, it's not just the horrific treatment of the doctor who did not want to give up his seat -- no, it's also because we have now had a lesson in what an airline ticket contract looks like, and we realize absolutely that "it could have been me."  Jimmy Kimmel's video that emulates the oily marketing tone that United uses has it just right.  Like thousands of others, I won't be flying United again, no matter how cheap the ticket.

The other reputational risk story appeared a few hours ago in the Wall Street Journal, and discusses how KPMG has had to fire five partners, including the head of its audit practice for a breach in the confidentiality of which KPMG audits would be examined by its regulator, the Public Company Accounting Oversight Board.  Along the way in reading the article, we find that KPMG was Wells Fargo's auditor and never uncovered any wrongdoing in its sales practices. 

How do institutions like United and KPMG recover from such episodes?  How is our confidence in each affected by such news?  I'll be talking more about this topic in another couple of days when I write more about conduct risk in general.




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