PCG News: What’s a Reputation Worth?

cfo thumbAs the Toyota Motor Corp. is learning, none of the perils a company faces is harder to measure than damage to its reputation. Other hazards, from a plant explosion to a terrorist attack to a natural disaster, may threaten a company’s very ability to operate, but a sullied corporate image exacts a price that other risks don’t: devaluation in the eyes of your customers.

Toyota can, of course, compensate buyers, retool its production methods, and invest in image-rebuilding ad campaigns. But it has no real way to predict when, to what extent, or if its brand can regain its former sparkle — or what it may have lost as a result of its vehicles’ infamous acceleration problems.

To be sure, metrics tied to a company’s brand have long existed. In accounting terms, such things as patents and trademarks, business processes, and training policies are referred to as intangible assets and generally thought to be key components of a brand. When a company is acquired, the buyer accounts for the cost of its new intangibles on its balance sheet and continues to hold them on its books as they depreciate.

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