Goldman and Communication Risk Management

Next up in the continuing intersection of legal and regulatory issues with media and public opinion: adverse publicity as a financial risk. According to this story in The Wall Street Journal, none other than Goldman Sachs declares in their most recent regulatory filing:

"adverse publicity" could 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."

Goldman lists adverse publicity as one of 12 "risk factors" that might impact the firm's financial performance.

Seems logical enough, a risk like many others (consider "political instability," for instance, or "increased regulatory scrutiny"). Yet, like so much that happens in the court of public opinion, actually listing such a risk in a filing is unusual enough to warrant news coverage. Consider this comment in the article, by Professor Charles Elson at the University of Deleware:

[Elson] couldn't recall a previous instance where a company cited bad publicity as a risk to its business. "It's reflective of the rather bizarre political climate in which we operate."

Elson, it should be noted, knows a thing or two about both corporate regulatory filings and publicity -- he is likely among the most quoted law professors in the nation on the subject of securities law. He also uncorks the most interesting quote in the article, stating: "Goldman has become one giant pinata to whack..."

(As an aside, many moons ago, Professor Elson was my Corporations professor in law school).

Ultimately, the Goldman folks have once again spotted a trend well before others: i.e., the undeniable importance of communications risk management in the information age. Again, from The Wall Street Journal article:

Goldman has long viewed its communications department as a risk-related function, meaning executives realize that a misstep in how it deals with the media or an issue could cause unnecessary damage to the company's brand name... "Press coverage and other public statements that assert some form of wrongdoing, regardless of the factual basis for the assertions being made, often results in some type of investigation by regulators, legislators and law enforcement officials or in lawsuits," the filing said.

Couldn't have said it better myself!