Reputation metrics and risk mitigation

Alberto Lopez Founder and Chief Executive, alva

2 July 2015

Agenda

•  Welcome to the world of hyper transparency •  Are you ready? •  Reputation Intelligence is useless… •  Thomas Cook, hindsight is a wonderful thing •  … if the Board doesn’t know or doesn’t care

I want my life back

No longer a “Crisis Management/PR” issue

Must get the signal early… but it’s not easy

Insurmountable amount of information

It’s not easy but it’s a MUST

•  Effective and relevant filtering is required •  Must be contextualised to the business strategy and goals •  Must cover all stakeholders •  Requires dedicated resources •  Must be easy to access (24/7) •  And easy to ACT

Reputational Impact Case Study – Thomas Cook

•  Thomas Cook has had some challenges –  CEO announced departure –  The attempted child abduction from a hotel complex used by Thomas Cook –  Attempted charging of a British parent for wishing to change hotel –  Corfu Child Deaths Issue

•  But on the plus side, –  The acquisition of 5% of stock by Fosun pushed the share price up

•  Is Reputation the same as Financial Value? No •  How do they differ? How do they relate to each-other? How do impacts evolve?

Price Softening – But Not Catastrophic... Yet

•  The price has softened, due to some financial incidents •  But generally is recovering along with the market •  Some recent positive, and some minor moves up/down •  Reputation relative to Sector is clearly negative •  But share price does not reflect alva’s public sentiment analysis... yet

Thomas Cook Impact vs. Sector - Clear

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20-Jan 29-Jan 7-Feb 16-Feb 25-Feb 6-Mar 15-Mar 24-Mar 2-Apr 11-Apr 20-Apr 29-Apr 8-May 17-May

Thomas Cook - vs - Sector Avergae

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travel-sector

Linear (thomas-cook)

Volumetric Impact Example – Pos/Neg

-3.50

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20-Jan 29-Jan 07-Feb 16-Feb 25-Feb 06-Mar 15-Mar 24-Mar 02-Apr 11-Apr 20-Apr 29-Apr 08-May 17-May

Reputation Impact Volumetric Measure

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Real time reputation issue tracking

Analysis – Corfu inquest

Key findings Pre-inquest

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Thomas Cook Travel sector Linear (Thomas Cook)

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20-Jan 26-Jan 1-Feb 7-Feb 13-Feb 19-Feb 25-Feb 3-Mar 9-Mar 15-Mar 21-Mar 27-Mar 2-Apr 8-Apr 14-Apr 20-Apr 26-Apr 2-May 8-May 14-May 20-May

!  Thomas Cook’s score fell -1.45 over the period following initial coverage of the inquest into the deaths of Bobby and Christi Shepherd.

!  Peter Fankhauser and Nicola Jordison refusing to apologise catalysed volumes and drove the lifecycle of the issue.

!  Average volumes increased +1,740 over the period

Thomas Cook representative, Nicola Jordison, declines to apologise to the Shepherd family during inquest hearing

Thomas Cook donates half of Corfu compensation

Peter Fankhauser refuses to apologise to Shepherd family

5.96 Score*:

Score*: 4.51

799 Volume:

2,539 Volume:

Inquest

*alva scores range from 1-10 with 5.5 the neutral point

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20-Jan 29-Jan 07-Feb 16-Feb 25-Feb 06-Mar 15-Mar 24-Mar 02-Apr 11-Apr 20-Apr 29-Apr 08-May 17-May

Thomas Cook - alva Index Moving Average

Warning Signs – Reputation Lifecycle

Reputation Harm Started Mitigation Required Success Likely Investment Advised Now Share Price Impact low/nil

Reputation Harm Growing Mitigation Critical Success Less Likely High Investment Needed

 

Opportunity and Challenge

Know when you are in the Amber Phase and leverage your position Amber Phase -  Take corrective action, spend wisely, target effectively -  A good chance of success

Red Phase -  It’s often too late for corrective approach, enter damage mitigation -  Expect more problems to come and increasingly hostile public reaction Opportunity -  Time to take action early and head off larger impacts – use it -  Time to plan for reputational indemnity/ insurance – investigate

Reputational Impact vs. Financial Impact

•  The alva Index has identified a substantial reputational impact recently •  But share price has not yet changed •  We know there is reputational harm, but there is not financial harm yet •  Reputational impact comes sooner – during or before Amber Phase •  Financial impact comes later – during or after Red Phase •  Corrective Action has most likely positive outcome during Amber Phase •  Insurance can be created based on Financial and Reputational Impact

What does it all this mean anyway?

•  Knowledge plus Action will yield the best outcome

•  Use metrics and information to assess and plan responses

•  Investing at the right time to gain the right value

•  Accept that Reputation is not Share Price – they are linked

•  Look at Risk Mitigation products based on Reputation and Share Price

•  Use Risk Mitigation insurance products to protect value

The board needs to know (or care)

Reputations are here to stay

Thank you Alberto Lopez - CEO

alberto.lopez@alva-group.com @alvaceo