In recent months, the financial services industry – banks in particular – has stepped up its PR and marketing activities, looking to rebuild trust with a recession-worn public skeptical of its motives. Citibank, for example, opened a new blog in February, posting video of its executives explaining how they've changed since the financial meltdown.
On Wall Street, where your brand is one of those intangible assets that investors consider right along with the P&L statement, banks are recognizing that their brands need a repositioning in order to not only ward off regulator scrutiny, but also return to or maintain profitability.
But it was Goldman Sachs that put those concerns into writing last week when it filed its 2009 10K. The Wall Street Journal noted the curious new risk of “adverse publicity” in the investment banking firm's February 26 filing. Goldman wrote:
The financial crisis and the current political and public sentiment regarding financial institutions has resulted in a significant amount of adverse press coverage, as well as adverse statements or charges by regulators or elected officials.
Dealing with that attention “is time consuming and expensive,” and can “have a negative impact on our reputation and on the morale and performance of our employees, which could adversely affect our businesses and results of operations,” the bank noted.
To elevate “bad press” to the status of a potential risk to its business along with market fluctuations and natural disasters, demonstrates how serious Goldman sees the threat of government and market reaction to public sentiment.
“This is really a hedge to protect them in case something goes really wrong,” notes Michael Porter, president and cofounder of New York IR firm Porter LeVay & Rose.
Goldman Sachs VP of media relations Ed Canaday confirms this is the first time the firm has added this particular risk, but declines further comment.
Those working in financial and corporate PR likely see their day's work validated by this admission from the global firm that yes, corporate reputation management impacts the bottom line.
“I think it is an ‘A-Ha' moment,” says Ryan Barr, SVP and director of financial relations at Hill & Knowlton in New York. He calls the example a representation of the continued convergence of corporate and financial communications work and the need for a fully integrated communications approach.
“At the same time, I don't think there's a CEO out there that would say their reputation doesn't affect multiple aspects of their business,” he adds.
But on Wall Street, reputation can be a defining factor.
“Wall Street is very emotional,” points out Porter. “This is Goldman… There's no one in the financial industry that wouldn't do business with them. That being said, people do get worried because everyone's out there taking shots at them. It's got to rattle their customers at some point.”
Goldman isn't alone in its concerns. Beth Haiken, SVP in Ogilvy PR's corporate practice in San Francisco, notes that another image-challenged company, AIG, posted a similar missive in its 2009 10K.
“Adverse publicity and public reaction to events concerning AIG has had and may continue to have a material adverse effect on AIG,” it wrote.
Analysts will often dive into the risks contained in an annual 10K to find the meat of what's going on at a company, points out Haiken, who led global PR at The PMI Group, a Bay Area mortgage-insurance and credit-enhancement company, prior to joining Ogilvy.
“It used to be risk factors were pretty straightforward, mostly external, concrete risks,” she says. “My guess is what you'd see is they are just getting longer and longer… [It's] where a company can try to head off a lawsuit. There's a prevention factor here.”
Haiken suggests companies will need to more carefully consider the writing of their 10Ks in the future as public scrutiny of corporations – and the risk that comes with it – remains high.
“I think what we may see a bit more of is companies really taking a reputation risk-management approach, identifying ahead of time what risks the brand faces,” adds Barr.
Goldman, along with its lawyers, clearly marked its precedent here, but it is just the start of 10K season and many more companies and their communications teams have yet to file.
“It'll be interesting to see if this is an isolated incident or the beginning of a trend,” says Haiken.