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J.P. Morgan Punished for ‘Reputational Risk’

When J. P. Morgan divulged a trading loss of $2 billion, the May 10, 2012 announcement had repercussions as soon as the following day. A stock decline of 9.3 percent amounted to a $14.4 billion loss in value. According to the Wall Street Journal, Fimalac SA’s Fitch Ratings downgraded the bank’s credit rating, too.

Said the Wall Street Journal report of May 12, 2012, “The rating firm cited ‘potential reputational risk and risk governance issues.’”

Reputational risk. The quick change, one brought about by a business strategy and not by the subterfuge of a rogue employee, is a reminder of the rapidity and force of the world’s response to a disturbance in a company. (posted May 14, 2012)