Monthly Archives: April 2011

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America’s Most Reputable Companies

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As a business asset, reputation is often overlooked in favor of the more easily quantified components of a typical balance sheet. But reputation may be the most important factor in determining whether or not a consumer chooses a particular product or service. And although it may be difficult to put a number on reputation, it’s not impossible, as the latest survey by the Reputation Institute indicates.

As reported in Forbes, according to the survey of more than 30,000 consumers, Amazon.com is the most reputable large companies in the United States.

“Amazon is the most reputable company in the U.S. in 2011 because consumers believe that it stands for more than what it sells,” says Anthony Johndrow, managing partner at Reputation Institute. “Its enterprise-wide story engages consumers in more than just delivering innovative products and services, a trustworthy and ethical customer experience or strong financial performance. The whole really is greater than the sum of the parts with Amazon, and this holistic perception creates a meaningful connection between Amazon and consumers, resulting in an excellent reputation score.”

The Reputation Institute gauged reputation by measuring how people felt about 150 of the largest U.S. companies in the areas of trust, esteem, admiration and good feeling. From there they were able to create a “RepTrakPulse” score that went from 0 (the worst) to 100 (the best). Amazon’s 82.7 score was 1.3 points higher than the second place company Kraft Foods. The next four companies  on the list–Johnson & Johnson, 3M, Kellogg’s and UPS–were the only other companies to score in the 80s.

On the other end of the spectrum, unsurprisingly, financial firms received some of the lowest scores. Freddie Mac’s 29.47 score put it at the bottom of the list with AIG, Fannie Mae, Goldman Sachs and Halliburton rounding out the bottom five. The highest charting insurer was State Farm, which was 48 on the list with a score of 72.7.

The following are the top 10 most reputable U.S. companies (the entire list can be found at the end of the Forbes article):

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Georgia Storms Cause $32 Million in Insured Losses

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Georgia has been through some pretty intense weather this week. Severe storms ripped through Georgia and neighboring states, ushering in high winds, hail, lightning and at least 20 tornadoes.

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It has been reported today that seven people were killed in Georgia alone and hundreds of thousands were left without power.

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Needless to say, communities in the area are left with much to clean up.

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And insurance companies are left with a lot of claims. In fact, insured losses from the storms in Georgia are estimated at $32 million, according to Georgia Insurance Commissioner Ralph T. Hudgens. This number does not include uninsured losses and is likely to grow, he warned.

“We’ve been quite busy the last couple of — actually we’ve been busy this year,” said Richard Tison, a Claim Representative for State Farm. And the damage is not just in one place.

As Georgia residents continue the cleanup process, most can do so knowing that their electricity has been restored. As of this morning, only 300 metro Atlanta residents remained without power.

Bernanke: Clearing House Risk Management Needed

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Fed Chairman Ben Bernanke is calling for stricter risk management of financial clearing houses. During a recent speech in Stone Mountain, Georgia, he stated how important these clearing houses are and how important it is to protect them from systemic risks. And important may be a bit of an understatement.

Basically, when a financial transaction is processed (common stock, futures, options, etc.) either in an exchange or over the counter (OTC), the trade is handed over to a clearing house, which assumes the legal counterparty risk for the trade. Basically, the clearinghouse makes sure both parties involved in the trade make good on their agreement. And if one does not, it absorbs that risk. It goes to say that clearing houses take on A LOT of risk, especially considering the chances of a large firm defaulting or a market crash.

Worrisome to Bernanke, and others I’m sure, is the concentration of such risks among only a few organizations, the most popular being the Depository Trust & Clearing Corporation and Fedwire. Realizing the importance of these firms for day-to-day financial transactions, he called for actions to ensure the safety of these intermediaries.

“Because the failure of, or loss of confidence in, a major clearinghouse would create enormous uncertainty about the status of initiated transactions and, consequently, about the financial positions of clearinghouse participants and their customers, strong risk-management at these organizations, as well as effective prudential oversight is essential,” Bernanke said.

Bernanke does point out, however, that clearing houses have withstood severe crises in the past, to which he attributes to “good planning and sound institutional structures but also some degree of good luck.”

But are clearing houses too big to fail? Will they take on unnecessary risks because that is how they view themselves? We’ve seen how that has played out before so let’s hope Bernanke’s words are put to action.

Read the full transcript of Fed Chairman Ben Bernanke’s speech at the 2011 Financial Markets Conference.

The Risk of Being Sucked Out of a Plane

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Last Friday, while en route from Phoenix to Sacramento, a five-foot hole that appeared in the fuselage a Southwest Airlines-operated Boeing 737 jet forced the pilot to make an emergency landing. Since then, the Federal Aviation Administration ordered mandatory inspections of nearly two hundred 737s worldwide.

The plane whose fuselage ripped open was 15 years old and had taken nearly 40,000 flights. And the concern that other old models may have similar vulnerabilities proved warranted when Southwest found five other jets with fuselage cracks. Scary stuff really.

But much like the ongoing confusion and misinformation surrounding nuclear radiation risks, few people understand the actual risk of a mid-flight tear in a plane’s cabin. And when I say few people actually understand either of these things, I certainly include myself in that classification.

Fortunately, someone much smarter than I is here to explain.

Brain Palmer of Slate explains why no passengers were sucked off of Southwest Flight 812.

How risky might the latest incident have been for passengers? The pressure differential between the cabin and the outside was approximately 7.5 pounds per square inch, and the hole measured 720 square inches. That means the maximum force applied would have been around 5,400 pounds—more than enough to blow an unrestrained person out of the plane. But a passenger would only feel that much force if he were literally plugging the hole with his body.

Keep in mind that the hole was not right next to any passengers or beneath their legs. It was in the ceiling of the cabin, which would have been at least two to three feet away from the heads of anyone sitting inside. At that distance, the force of an explosive decompression would be greatly dissipated. Air-flow patterns are complicated, and it’s impossible to quantify this effect for any given passenger. But as a simple way to visualize the effect of distance, we might imagine the force spreading itself out across the surface of an expanding hemisphere centered on the hole. Using the formula for spherical surface area, we see that at a distance of three feet, the 5,400 pounds of force would be spread across an area of 8,143 square inches. Four feet from the hole, it would cover 14,476 square inches, and so on. As the force gets more and more stretched out, the proportion of it that would be working to push a body out of the plane diminishes. On top of that, the air would be free to flow around the passengers in their seats, which would make its impact still weaker. Since the hole was in the ceiling of the plane, any decompressive force would have had to act against the full body weight of any passengers, lifting them up and out of their seats before it could eject them in a gust of air.

Here’s an experiment that illustrates the principle: Plug your sink drain with a rubber stopper, fill the sink with water, and then slowly remove the stopper. You’ll notice that the stopper is much harder to budge when it’s close to the hole and perfectly aligned with it. But tilt the plug slightly, or pull it out a little bit, and the force becomes barely noticeable. That’s more or less analogous to what happens when a hole opens in a Boeing 737 at cruising altitude.

So I guess it turns out that you can’t believe everything you see in action movies. I really can’t believe Steven Seagal would be disingenuous with his art.