Goldman Developing Innovative Models To Defend Itself From Matt Taibbi

Goldman Sachs already made it pretty clear that bad public relations was a major business risk in their recent financials, but now they’re getting dead serious.

The investment bank has actually built scenario models to study reputational risks — begging the question of which is harder, making tons of money or getting people to like you… and which can be modelled more accurately.

“Operational risk provides a mechanism to begin discussing the magnitude of the risk,” says D’Arcy, based in Tokyo. “You’ll never get it to be extremely precise, but you can be directionally correct. The impact of reputational risk differs across jurisdictions.”

Operating in the US carries inherent compliance and the legal risks of regulatory fines and class-action lawsuits. D’Arcy says in Japan there is greater emphasis on the risk of the regulator shutting a business down, stopping a firm trading new business or restricting it to risk managing positions already on its books.

“If the regulator were to shut an office down for a period of time, the operational risk practitioner has the tools to determine what that impact would be,” says D’Arcy.

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