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Posts Tagged ‘reputation risk’

What Are the Greatest Risks?

Posted by Larry Doyle on December 12th, 2011 10:41 AM |

In the midst of all the research and analysis put forth by virtually every entity within the financial services industry, I VERY rarely see any mention of what I deem to be the two greatest risks that individual investors face each and every day.

We are fed and can read volumes about a wide array of risks, including market risk, interest rate risk, credit risk, currency risk, prepayment risk, volatility risk, and liquidity risk. While overwhelmed by analysis on these risks, my ‘sense on cents‘ leads me to focus primarily on the two greatest risks of all.

What are these risks and why is it that those within the financial services industry do not highlight them? (more…)

Goldman Sachs: The Reputation You Deserve

Posted by Larry Doyle on March 2nd, 2010 7:08 AM |

When you sleep with dogs, you wake up with fleas.

Of all the lines I heard bandied about during my time on sales and trading desks on Wall Street, the line I reference above is one of my favorites. Why? That line goes straight to reputation.

As much as anybody may want to whine, bitch, or moan about being treated unfairly, ultimately the court of public opinion will convey upon an individual or an entity the reputation he or they deserve.

As a parent, I have often had the discussion with my children that they had better be exceptionally careful as to what they do and with whom they hang because you carry your family name with you everywhere you go and you only get one reputation. For this very reason, I strongly believe the greatest risk in life is reputation risk. (more…)

Tiger Woods and The Greatest Risk

Posted by Larry Doyle on December 18th, 2009 3:07 PM |

What do the dalliances and sexploits of Tiger Woods have to do with Sense on Cents? Everything.

Uh-oh. Are you thinking, “Don’t tell me, LD, that you are going to turn a staid and fairly conservative business blog into a place for social stargazing and barroom gossip.”

No, don’t worry about that. While there are some obvious personal lessons involved in the Tiger Woods saga, there is a very real business lesson as well. I initially addressed this lesson when writing about Bear Stearns a year ago. My piece, “The Greatest Risk,” addresses reputation.  I wrote then:

For those who have read my pieces, you have heard me stress how important it is to understand risk. On Wall Street,as in any business, there are all types of risk. For example, there is market risk, credit risk, interest rate risk, prepayment risk, and counter-party risk amongst others. For anybody involved in the markets, all of these risks are facts of everyday life, but they pale in the face of what many feel is the greatest risk of all, and that is “in never taking risk.” For without risk, there is no reward.

However, in my opinion, there is a greater risk that lurks everyday and for my money is massively mispriced, and that is reputation risk. When I say mispriced, I mean there is no premium high enough to jeopardize one’s personal and professional reputation.

Again, there are many who would say Tiger Woods, or any individual for that matter, is entitled to his personal privacy and should not be publicly judged by his private actions. I would respond that Tiger Woods is not strictly a private person, but he is also very much a public brand, and effectively an industry unto himself. The power of the Tiger brand was enormous. As with any brand, the marquee value is maintained only by continually burnishing and polishing the image.

Say what you want, but the Tiger image is forever changed and with it the Tiger brand. Can Tiger redeem himself? Of course. The power of redemption is a remarkable force. I hope for his personal sake that he addresses his issues and does redeem himself.  That said, the Tiger brand is forever changed.

The lesson for all of us, and especially those starting out in the professional world, is one I address with every individual whom I mentor. As I highlight in my Career Planning link here at Sense on Cents:

While I am fully supportive of taking prudent risks in a career, the one risk for which there is no premium high enough is the risk of a tarnished reputation. With word of mouth being the most powerful form of advertisement, you never want to run the risk that your product is viewed as impaired by a questionable reputation.

Tiger Woods’ personal transgressions put his professional brand at this greatest risk. He has lost more than he would have ever imagined.

Tiger is perhaps the greatest golfer to ever play the game. As in any business, though, the risk of jeopardizing one’s reputation goes far beyond any golf course, trading floor, or boardroom.

That is the Tiger lesson for all of us.


The Greatest Risk

Posted by Larry Doyle on December 21st, 2008 4:56 PM |

There remain no shortage of developments in the economy, the markets, and on “the street.” While I could continue to write at length on a number of those topics, I think it is healthy to take a weekend break from the regular hustle and bustle. With a break in the show, perhaps we can take a walk backstage and I can share with you some insights into Wall St. that occurred back in the ’90s but didn’t fully play out until 2008.

Please allow me to set the stage. I joined First Boston (now Credit Suisse) in 1983. I was very fortunate to gain employment at First Boston (FOB) as it was one of, if not, the hottest shops on the Street at the time. FOB was very much a traditional “white shoe” sort of firm. Propriety was important in executing business, although I am sure there were some sort of improprieties that occurred behind the scenes. I was too young to get dragged into anything that pushed the envelope. Although the head of HR threatened to fire me 6 weeks into my tenure (I think she was just trying to scare me), for the most part my 7 year career there was wonderful. I learned the business and developed many great relationships.

I was recruited to join Bear Stearns by an individual for whom I worked with for almost 15 years. I was very hesitant to go to Bear Stearns because it always had a reputation for being an extremely aggressive firm in every regard. That said, the person recruiting me was the most principled individual with whom I ever worked on Wall St. and he and I continue to have a very close relationship. I felt that I was working as much for him, if not even more, than I was working for Bear. I admired and respected his values and integrity. (more…)

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