LEVICK Weekly - July 27 2012

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Barclays and Libor: …

Barclays and Libor:
Swim, Dammit, Swim

Scandal: What Every Business
Needs to Learn From Penn State
and the Freeh Report

Adjusting Your Content Strategy:
for the Penguin Update

5 Ways Insurers Can Position
Themselves to Win Under
the ACA

BPA: Emotions Trump Science
at Every Turn

Mike Koehler on Foreign Corrupt
Practices Act Reform


www.levick.com/insights

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  • 1. EDITION 1Weekly July 27, 2012Barclays and Libor:Swim, Dammit, SwimScandal: What Every BusinessNeeds to Learn From Penn Stateand the Freeh ReportAdjusting Your Content Strategy:for the Penguin Update5 Ways Insurers Can PositionThemselves to Win Underthe ACABPA: Emotions Trump Scienceat Every TurnMike Koehler on Foreign CorruptPractices Act Reform
  • 2. Barclays and Libor:Swim, Dammit, Swim The thing about a tsunami is that, if you haven’t Of course for American banks, the tsunami du jour is the Libor-fixing scandal that has (like homeowners) can file lawsuits. In just one American city, the Federal Reserve Bank gotten to a safe place soon enough, there’s already cost Barclays $450 million in fines, of Cleveland has already warned that a big exposed that British banking giant to an entire percentage of prime adjustable-rate mortgages not much you can do except watch your own generation of litigation, and forced Chief Ex- and subprime ARMS are tied to the Libor extinction roll in from the deep. ecutive Robert Diamond and Chairman Marcus index. In some cases, it may be difficult for Agius to resign. plaintiffs’ lawyers representing homeowners to show causation but they’ll certainly try, and Richard S. Levick, Esq. It’s a little surprising that an event that so Originally Published on Forbes.com won’t stop trying for years. fundamentally compromises the global mar- ketplace has generated widely divergent Can you say “asbestos?” It’s a neat comparison commentary. There are even suggestions from and a vexing one. The world can (and does) high-authority sources that the scandal has live without asbestos. It cannot live without been significantly overstated by vengeful me- banks. dia and self-interested politicians. On the other There is, as has been pointed out, every reason side, equally informed commentators warn to anticipate that U.S. financial institutions that, if attempts to manipulate Libor were suc- are also in for their share of severe regulatory cessful, it could be “the biggest securities fraud fines, incessant litigation, and further political in history, affecting investors and borrowers calumniation. Earlier this year, it was reported around the world.” that traders at Citigroup and UBS tried to Since Libor involves literally trillions in global manipulate Libor rates for the yen. UBS has instruments, an incalculable number of people reportedly already cut a deal in various inves-
  • 3. Weekly “ There’s an uptick in inquiries about account transfers to mutuals and ethical banks...Once customers realized that manipulation may have artificially inflated the price of credit across the whole economy, maybe for years, that’s a bread and butter issue.” in order to fix the prime rate. That the Libor “After we then found out the Libor market was, investigations stretch back to 2007 only exacer- to use Paul Tucker’s word, a ‘cesspit,’ you were bates the communications challenge because it bound to get the whole issue of banking reform Tupungato/shutterstock.com additionally underscores the fact that the prob- reopened,” adds Mason.With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and lem was systemic, not aberrational. And, whenemploys 140,000 people. We’re reminded of a similar uptick in the U.S. Robert Diamond agrees to forego $31 million in a few years ago when community banks saw stock bonuses, it too fuels public ire by beggingtigations in exchange for leniency on criminal After all, we’ve reached something of a break- some increase in their business as a result of the question, why was the man responsible forcharges. Bank of America was subpoenaed ing point as stakeholders simply cannot toler- the banking scandals. But the more pressing is- this bank about to get so much money but forlast year. JPMorgan Chase, HSBC, and others ate more of the same betrayal they’ve endured sue on both sides of the Pond is the prospect of the inconvenient fact that Barclays got caught?sat on the Libor panel during the period since the subprime disaster. In that sense, even new legislation that could dwarf Dodd-Frank.under investigation and may also face a much less threatening crisis than Libor could Absent an extraordinary communications cam- In the U.S., the banks particularly need to takeunpleasant questions. become the straw that breaks the camel’s paign, there are long-term risks looming for the ongoing revival of interest in the Glass- proverbial back. As financial institutions wait the entire financial industry. In the UK, “the Steagall Act (the law limiting the securitiesA realistic assessment is that the industry’s their turn to enter the Libor line-up, they must big unanswered question is whether we will activities of commercial banks, passed in 1933actual exposure, civil and criminal – as well therefore face an extraordinary communi- now see consumers begin to desert Britain’s and repealed in 1999) very seriously. Las the looming harm to global markets – lies cations challenge: how do we talk to people main street banks,” says Paul Mason, econom- Richard Levick, Esq., President and CEO of LEVICK, repre-somewhere between “this is just a witch hunt” who’ve given us every chance to talk to them ics editor of the BBC’s Newsnight. “There’s an sents countries and companies in the highest-stakes globaland “this is an unprecedented disaster.” At the in the past but who, at this belated point in uptick in inquiries about account transfers to communications matters — from the Wall Street crisissame time, the impact of the tsunami will be and the Gulf oil spill to Guantanamo Bay and the Catholic time, are no longer inclined to listen? mutuals and ethical banks...Once customersmeasured at least as much in terms of public Church. realized that manipulation may have artificial-response and political reaction as in direct Right now Americans are experiencing much ly inflated the price of credit across the wholeeconomic fallout. less of a media feeding frenzy over Libor than economy, maybe for years, that’s a bread and the Brits, but that might change once they real- butter issue. ize that this scandal is almost tantamount to some bank manipulating the Federal Reserve
  • 4. Scandal:What Every BusinessNeeds To Learn FromPenn State And TheFreeh ReportThis week, former FBI Director Louis Freeh confirmedwhat most people following the Jerry Sandusky scandalhave believed since the story was first reported; that themost senior Penn State officials knew about the coach’sreprehensible acts and did nothing to protect the childrenhe was abusing for more than a decade.Richard S. Levick, Esq.Originally Published on Forbes.com
  • 5. WeeklyThis week, former FBI Director Louis Freeh Among their many greater sins, they failed to all, a few community members posting on an Companies and organizations know how toconfirmed what most people following the understand the transparent nature of this digi- internal social network don’t carry the weight deal with three of the four quadrants outlinedJerry Sandusky scandal have believed since tal age—that institutional privacy has vanished of 60 Minutes or the New York Times. The con- above. High-risk, high-authority stories needthe story was first reported; that the most and everything is now discoverable. As a re- tent was certainly damaging, but it was being to be dealt with aggressively and immediately.senior Penn State officials knew about the sult, the rest of us have been provided a salient circulated by folks who seemingly lacked the Low-risk, low-authority stories are best leftcoach’s reprehensible acts and did nothing lesson in how high-risk, low-authority chatter influence to be widely believed. alone. And low-risk, high-authority stories mayto protect the children he was abusing for ought not to be ignored by anyone responsible require some form of response, but nothing on The problem, however, is that the messagemore than a decade. for protecting a brand or high-profile reputa- the level of a national news conference. board postings were, by definition, the breed tion (not to mention children at risk).The only conclusion one can draw is that of high-risk, low-authority conversations that It’s when we come to the high-risk, low-author-former president Graham Spanier, former When 22-year-old reporter Sara Ganim broke can cause real problems in the social media ity stories that we see companies and organiza-athletic director Tim Curley, and the late head the Sandusky story open, she did so by follow- era. All potential news falls into one of four tions stumble. Penn State is not alone. It is thecoach Joe Paterno believed that whispers about ing up on conversations she stumbled across categories. Let’s stick with the Penn State warning shot across the bow. Your risks maySandusky’s gruesome acts were safely con- on Penn State’s own online message boards— example and add a few hypothetical stories to not be pedophilia, but what enterprise risksfined within community walls. As long as they conversations that Penn State officials either illustrate the point: are people talking about now that provide youkept the lid tightly shut, the accusations would were not monitoring or disregarded as not early warning? • High-risk/high-authority: The Wall Streetnever spring forth from this particular credible enough to ever cross the thinning Journal publishes front-page accusations Time and again, we’ve seen children’s productPandora’s Box. line between rumor and “real news.” After that Jerry Sandusky has been abusing companies fail to take what’s written on the children for years. This is the moment the Mommy blogs seriously. We’ve seen food pro- story goes viral. ducers ignore what the plaintiffs’ bar is writing on its blogs as it searches for the next big class • Low-risk/high-authority: The Wall Street action case. And we’ve seen single customer Journal publishes a back-page report that service snafus detailed on YouTube evolve into freshman applications at Penn State are national scandals before the purveyor of said down slightly from the previous year. service even knows what hit it. And it’s not just • High-risk/low-authority: Community mem- bloggers and social media. It’s all sources. How bers post to a message board that Jerry does your company stack up in search engines Sandusky may be abusing children. This when you type in risk terms, not just the name is the moment that institutions should be of your company or brand? When you whistle on notice. Monitor aggressively and advise past Penn State, don’t whistle too loudly. decision makers of the rumors and that, The advent of social media has provided even critically, they are no longer operating in a the most low-authority sources with a mega- vacuum. phone that helps their messages reach the • Low-risk/low-authority: A student posts to mainstream media, plaintiffs’ attorneys, regu- a message board that the dining hall food lators, analysts, and others who can do lasting Richard Paul Kane/shutterstock.com gave him athlete’s foot.
  • 6. Weeklyharm to a brand or reputation. At the sametime, however, it’s most important to note that meant looking at the social media buzz sur- rounding Notre Dame, Pitt, and other similar Adjusting Your Content STRATEGY:social media have also provided companiesand organizations with a crystal ball of sorts— institutions to see if speculation about football coaches’ behavior is as rampant across the for the Penguin Updatea tool by which they can see into the future to NCAA as it was in State College. Lauren Yontefidentify the issues that may eviscerate their 3. Understand that low-authority sources Originally Published on Bulletproofblog.combrands in the coming hours, months or years. Annette Shaff/Shutterstock.com matter: A recent Agenda article authored byOf course, that’s only true if they take the time Amanda Gerut details just how much weightto study the tea leaves. With the release of Google Penguin, it’s way, you don’t have to rely solely on Google some forward-thinking companies lend to likely time to take a good hard look at your rankings for traffic. Be sure to create meaning- social media chatter. Coca-Cola, for instance, content strategy. Content has always been ful headlines, as most social users today won’tHow can other companies and uses social media to “head off thorny issues.” king, but unique content that offers value read past the first 70 characters. Also be sureorganizations best ensure that Proctor & Gamble CEO Robert McDonald is and substance in order to earn Penguin- to focus on quality and the value your readersthey stay on top of high-risk, personally involved in the monitoring process, proof links is now absolutely essential. garner from your insights.low-authority issues? saying “I personally see the comments about the P&G brand. This allows for real-time reac- How can organizations ensure that the Pen- And third, watch your keyword use. While tion to what’s going on in the marketplace, guin update doesn’t devalue their content keywords are great, the latest Google update1. Institutionalize a social media moni- because we know that if something happens under the new paradigm? means that over-use will scream spam. Whiletoring structure: The task is greater than in a blog and you don’t react immediately—or, we’ve all be trained that we should use thesimply having interns or assistants hand over First, assess your current content situation. worse, you don’t know about it—it could spin same keyword combinations throughout ouran aggregation of Google News items each Check Google Webmaster Central to see if you out of control by the time you get involved.” I content so that we’ll rank well for a particu-morning. Companies need to make use of the have a message from Penguin. If your content couldn’t have said it better myself. lar phrase, you will now be penalized andmyriad analytical tools available to know what was impacted by the update, chances are if you removed from the rankings all together ifis being said about their brands online, who is Once we step back from the negligence carried will have been notified. Check your Analytics keyword density is too high. It’s now best tosaying it, and—perhaps most important—who out by PSU officials, we begin to see how they to assess potential Penguin damage. A simple write content that is closely associated withand how many people are listening. could believe such inaction was even possible. 90-day traffic report should tell you if you lost your business while not limiting yourself to They made the fundamental mistake of believ- visitors. Also, be sure to check your keyword2. Include risk and competitive analyses: keyword containing topics. Instead, embrace ing that low-authority sources lack the power referrer report, as well as manually checkCompanies can’t just scour the Web for men- all relevant concepts, even if they don’t offer to take down an empire. Don’t make the same the rankings on some of your top keywords.tions of their brands or leadership; they need many keyword opportunities. And remem- mistake. The emperor’s clothes are as invisible Finally, be sure to use link tools to see your linkto anticipate their greatest brand risks and ber, never write your content first and then as they’ve ever been—even if the garment in profile and ensure that “spammy” or unnaturalinclude related risk terms in their sweeps sprinkle in your keywords at the end. Do your question is a navy blue football uniform. L links aren’t hurting your rankings.as well—whether they be “product recall,” research ahead of time and naturally incorpo-“bribery,” or “white collar.” When worrisome Richard Levick, Esq., President and CEO of LEVICK, repre- Second, make your content shareable. Chances rate any keywords as you write. L sents countries and companies in the highest-stakes globalchatter is detected, they also need to perform are that the content you write will end up on a communications matters — from the Wall Street crisis Lauren Yontef is a Social and Digital Media Accountcompetitive analyses that tell them if the prob- social network. So why not write about con- Supervisor at Levick and a contributing author to and the Gulf oil spill to Guantanamo Bay and the Catholiclem is theirs alone or an industry-wide trend. Church. cepts in a manner that will gain popularity on Bulletproof Blog™.To return to the PSU example, this would have social media and social networking sites? This
  • 7. 5 Ways It’s not every day that an industry has as many as 46 million new customers delivered to its doorstep. But when the U.S. Supreme Court voted 5-4 to uphold the Affordable Care Act (ACA) and the controversial individual mandate last week, that’s precisely what happened for health insuranceInsurers Can Position Themselves companies across the country. Richard S. Levick, Esq.To Win Under The ACA Originally Published on Forbes.com The law has new hurdles to clear in The influx of consumers is also problematic for Congress and the November election results the industry. With more high-risk patients on could change the dynamic yet again—but the rolls, insurers will need to offset increased the machinery of government is nonetheless costs by aggressively pursuing young, predomi- lurching toward implementation as the nantly healthy consumers who would not en- American public grows more accepting of ter the market but for the individual mandate. the new healthcare reality. Tens of millions If they don’t do so effectively, premiums will of Americans who previously chose to forgo rise even as the exchanges introduce unprec- health insurance will soon seek coverage. edented levels of competition. Let the battle for their dollars begin. You don’t need an advanced business degree to That contest will be predominantly fought in know what that scenario will mean. It is now the 50 state-run Health Insurance Exchanges incumbent on private insurance carriers to (HIX) that the ACA establishes to provide indi- modify their marketing and communications viduals and small businesses with affordable strategies to navigate these new challenges. coverage options from the industry’s private Insurers can no longer simply focus on large carriers. The vast majority of U.S. states were HR departments and other traditional custom- waiting on the decision before passing legisla- er funnels. They must reach a generation of tion to establish their exchanges. But with the American youth not entirely convinced of the SCOTUS decision, most will begin propping up value proposition. their exchanges by 2014 rather than allow the feds to step in and do it for them (a few ideo- logical stragglers notwithstanding).
  • 8. Weekly5 3. Understand that “young people” is not Insurers must therefore be keenly sensitive Here are five strategic imperatives the will one audience. to how their brands look viewed through 50 separate prisms and either adjust their policy help private carriers carve out a significant It’s not enough to define this new audience as “young people.” Insurance companies need terms or market the competitive advantages of slice of this still skeptical pie. to dig deeper and build brand identities that their coverage to address these varying local priorities. cater to the separate market segments under the “young people” umbrella. Whose brand 5. Excel at customer service.1. Understand that the individual mandate demographic is, of course, a digital animal. will be known for the policy that is tailored to Most of us who have had health insuranceis anything but mandatory. That means insurance carriers must now begin the young, single customer yet to start a fam- for years still don’t fully understand every a new race to be found and chosen online. ily? Whose brand will be known for the policyThere is a sense among industry insiders that nuance of our policies. From co-insurance to that is tailored to small business employees?many young people will opt to pay the modest Which companies will dominate search en- deductible rates, to the medical definition of Whose brand will be associated with policiesmonetary penalty set forth by the individual gine optimization (SEO) and marketing (SEM) an “experimental procedure,” today’s first-time designed for 30-somethings with kids in tow ormandate, rather than premiums for policies for the terms used to research their coverage customers will be all the more perplexed by on the way?they don’t think they need. The ACA imple- options? Which companies will make effec- the restrictions in effect and the options on thements a maximum yearly penalty of $695 for tive use of blogs and social media to enhance Establishing connections between the brand table. They will have a myriad of questionsthose who don’t obtain health care coverage, awareness of and affinity for their offerings? and these microtargets will go a long way and concerns.which could look pretty attractive to potential Most important, which companies will gener- toward defining a policy as best in class. Here, Customer service will therefore be paramountcustomers in lieu of policies they don’t believe ate the emotionally engaging video content the well-known brands have a head start be- to hold on to an especially fickle youth demo-they will use. that helps consumers immediately understand cause they are already viewed by many youth graphic and transform these buyers into life- that the risk of not being covered is too high? buyers as a safety sell. These companies canAs such, insurers cannot just articulate cover- long brand loyalists. Full transparency must continue to leverage this trust and familiarityage details or the pricing advantages of their Two decades ago, the “Harry and Louise” be a priority to ensure that customers under- as they have in the past.policies. They must also show that it’s too great television campaign blended information and stand their coverage limits. For the healthcarea risk to decline coverage. Carriers need to a healthy dose of fear to effectively kill health- industry, Sy Sims’ maxim, that “an educated 4. Localize outreach to 50 differentdiscuss the importance of preventative care; care reform in the Clinton era. Today, the same customer is our best customer,” is definitive. exchanges.how spending a little on routine doctors’ visits approach can be taken—with the opposite end Many young people will rely solely on the Thanks to the Roberts court, an elusive marketcan save your life; and the monumental costs goal in mind—via YouTube and other venues exchanges that will be set up in each state for segment long coveted by insurers is withinyoung people will incur if they contract a seri- that young people populate. When they emo- comparative policy shopping. The devil will reach—but only for those companies thatous illness or simply break an ankle. tionally connect to the benefits and risks of be in the proverbial details as each state will speak to the needs of young consumers, and do not being covered, they will get it. Action fol- present coverage options in different ways. so in a language that educates, motivates, and2. Emote online. lows understanding. Some will highlight deductibles over yearly inspires them to make the right choices. LUnder the ACA, young health insurance con- premiums. Others will focus more on coverage Richard Levick, Esq., President and CEO of LEVICK, repre-sumers are now able to rely on their parents details versus price. sents countries and companies in the highest-stakes globalfor coverage until they are 26—but they will communications matters — from the Wall Street crisisrely on the web thereafter. The 27-35 year-old and the Gulf oil spill to Guantanamo Bay and the Catholic Church.
  • 9. BPA:Emotions Trump Bisphenol A (BPA) is back in the news. This Instead, they respond emotionally, taking stepsScience at Every Turn time, it’s the General Mills brand Progresso to limit risks, no matter how insignificant they coming under fire for using the chemical might be. as an acid-resistant sealant in the lining That’s undoubtedly why Campbell’s Soup made of its metal soup cans. Despite a mountain the decision to go BPA-free earlier this year of scientific evidence that BPA is harmlessBisphenol A (BPA) is back in the news. This time, it’s the in the amounts found in food packaging, and countless other brands of canned foods have previously done the same. It’s certainlyGeneral Mills brand Progresso coming under fire for using the more than a few Progresso customers are why Beef Products Inc. had to shut down two- demanding the brand discontinue its use ochemical as an acid-resistant sealant in the lining of its metal f BPA and find other alternatives to thirds of its plants after parents campaigned against the use of ammoniated “pink slime” insoup cans. Despite a mountain of scientific evidence that BPA preserve its products and maintain school lunch hamburgers – even though the nutritional quality.is harmless in the amounts found in food packaging, more fine-textured beef had had doubtless prevent- On Progresso’s Facebook page– which is ed thousands of cases of foodborne illness.than a few Progresso customers are demanding the brand 213,000 “likes” strong – and via a consumer Consumer emotion is also why Progressodiscontinue its use of BPA and find other alternatives petition circulated being circulated online, con- probably will have no choice but to follow sumers are voicing frustration with the brandto preserve its products and maintain nutritional quality. in increasing numbers. They are concerned suit. Fear – now jet-fueled by the Internet – represents one of the most powerful motiva- about sensational reports that BPA can leak tors in the marketplace. When fear attachesGene Grabowski into water and food and cause a host of serious itself to a brand – rightly or wrongly – a com- health problems. pany’s best course is to do is whatever it takes It doesn’t really matter that the science doesn’t to assuage anxiety and demonstrate that con- actually support a ban on BPA. When it comes sumers come first. L to the safety of the food they put on their Gene Grabowski is Executive Vice President at Levick Strate- tables, American families don’t pay much at- gic Communications, the nation’s top crisis communications tention to what the guys in white lab coats say. firm. He is also a contributing author to Bulletproof Blog. Connect with him @crisisguru.
  • 10. WeeklyMike Koehler Foreign Corrupt Practices Act ReformMike Koehler, J.D., Assistant Professor of non-binding Department of Justice guidance.Business Law at Butler University, discusses Additionally, he stresses that the FCPA needsthe Foreign Corrupt Practices Act (FCPA). Mr. some limited structural reforms and outlinesKoehler believes the FCPA needs to receive his personal suggestions to enhance the FCPA. VISIT