The Financial Value of Reputation

Call them whatever you want, but one thing is certain. When Goldman Sachs talks, people generally listen. That’s why I found a statement from Goldman’s just published annual report to be nothing short of monumental: for the first time, the bank added “adverse publicity” to the laundry list of financial risks it faces going forward.

As reported by The Wall Street Journal ,arguably the most respected voice on Wall Street has acknowledged that negative press coverage could have a material impact on its financial results – or, more to the point, that corporate reputation possesses tangible financial value. This follows on the heels of a study a number of years ago by Ernst & Young that found 35% of a typical public company’s valuation relates to intangibles like brand awareness and regard.

Goldman’s insight, which is unparalleled in investment banking and, in my opinion, would have been impossible just a few years ago, suggests that the Great Recession may be convincing financial leaders that risk management involves more than investment portfolios. That’s good news for public relations professionals who have long argued that intangible assets like corporate reputation have genuine impact on the financial statement – and should be valued and managed accordingly.


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