Johnson & Johnson’s Faltering Reputation

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In the last two years, we have seen big hits to the brands of Toyota, BP and basically every bank in existence. Reputation risk has been an increasingly large concern reported by top execs on surveys since around 2005, but aside from improving crisis response and, maybe, buying insurance to recoup some losses, there are not a ton of clear-cut ways to manage such a nuanced, nontraditional exposure. (This article from our Risk Management magazine, “The Importance of Reputation,” offers some additional advice.)

We can now add one more company to the list: Johnson & Johnson. A recent New York Times article details at how the formerly Teflon brand on Johnson & Johnson has been struggling since its massive recalls.

Little red flags jut out from the shelves at a CVS drugstore in suburban Boston, alerting shoppers to shortages of nearly a dozen Johnson & Johnson products. Among them are Motrin, Rolaids, children’s Tylenol liquid and adult Tylenol, Mylanta, Pepcid AC and even some Neutrogena skin care products.

“Looking for Tylenol pain relief products?” asks one of the signs. The notices at CVS serve as a stark reproof to Johnson & Johnson, whose brands have for more than a century been synonymous with quality.

In the drug business, Johnson & Johnson will not just face lower sales. Their products will now have to compete with the similarly effective generic alternatives that are usually cheaper. The Johnson & Johnson brand used to demand a premium because people trusted it to be safer than store brands. The importance of that trust — particularly trust from parents — to the company is hard to overstate.

What will happen if it becomes frayed?

While the drugstore signs that helpfully suggest “Try CVS/pharmacy brand” are intended to assist frustrated shoppers in identifying alternatives to missing brand-name products, they also serve as constant reminders of another of J.& J.’s continuing problems: It must persuade millions of disappointed customers to once again pay a premium for products that may no longer seem to be of any higher quality than the less expensive store brand.

“I don’t even consider buying them any more,” says Thien-Kim Lam, a mother of two and a blogger in Silver Spring, Md.

Anyone have any suggestions for Johnson & Johnson?

The OMB Demands Answers About Insider Risks

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WikiLeaks has really stirred things up for the U.S. Government, ushering in questions regarding its policy for preventing insider data leaks. And that’s a good thing.

The Office of Management and Budget (OMB) has asked government agencies to detail their strategies for minimizing insider risk.

A highly detailed 11-page memo prepared by U.S. intelligence officials and distributed by Jacob J. Lew, director of the White House Office of Management and Budget, suggests that agencies use psychiatrists and sociologists to measure the “relative happiness” of workers or their “despondence and grumpiness” as a way to assess their trustworthiness.

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The memo was sent to senior officials at all agencies that use classified material. And though it is clear that the White House is in need of more rigid data leak prevention policies, some see the memo as paranoia.

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Steven Aftergood, a national security specialist for the Federation of American Scientists, claims the Obama administration is borrowing heavily from strict programs used at the CIA and other intelligence agencies to root out potential spies. He even goes so far as to call the idea of requiring workers to report any contacts with members of the news media as “triply absurd.”

But for others, what’s absurd is the fact that 200,000 diplomatic cables between the U.S. State Department and its diplomatic missions were leaked.

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The implications of such an act will most likely be serious and far reaching in regards to the U.S.-led war on terror.

What do you think?

Floods Devastate Brazil

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Brazilians are scrambling to high land and desperately conducting rescue efforts as heavy rain that started on January 1 continues to flood the country; meteorologists bleakly forecast that the rain will persist for the next few days. Considering that 950 natural catastrophes hit in 2010 (the second-highest number since 1980), this is hardly a reassuring start to the new year.

Australia is also experiencing a record-breaking flood — its worst in 50 years — that has killed at least 25 and may cost the nation $5 billion. Brazil’s flash floods and mudslides, triggered by a seemingly apocalyptic 14-plus inches of rain, have destroyed infrastructure and forced flight cancellations in countless airports across the globe.

More horrifying, however, is the nation’s mounting death toll. At least 500 have died in the perilous conditions; Brazilians report their families being torn apart by lethal walls of water and earth. Rescue workers are sifting through the mud and rubble with hopes of finding some of the thousands reported missing. Many of those who survived the event are stranded (the Civil Defense Department estimates 14,000) among the wreckage as homes collapse and officials order more evacuations. Schools and hospitals have become makeshift shelters and morgues.

President Dilma Rousseff flew to Nova Friburgo, one of the Brazilian towns most affected by the deluge (Teresopolis and Petropolis are the other two), yesterday to inspect the damage. Though only just sworn in as president on January 1, Rousseff is probably feeling the heat from those clamoring for an explanation of how this disaster wasn’t better anticipated.

According to Rio de Janeiro Governor Sergio Cabral, these cities’ populations have quadrupled in the last few decades, motivating officials to allow illegal construction on precipitous hillsides to handle the boom, despite the risks of living there — risks now evident as these homes built on mountain slopes cascade into the water. And although this marks the fourth consecutive year of devastating rainfall in Brazil, the staggering numbers of dead and missing citizens show a disturbing lack of preparedness. One can only hope that this disaster will inspire Brazilian authorities to take more proactive and preventative measures in protecting the country from torrential storms.

Obama Artwork Copyright Case Dismissed

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In the December 2009 issue of Risk Management, I wrote about how the artist who created the Barack Obama “HOPE” image was being sued by the Associated Press for using the original photograph that the image was based on without permission or payment. The artist, Shepard Fairey, had initially claimed “fair use” since he had made significant alterations to the original image in creating a new work of art. The case was anticipated to have possible implications for copyright law in the digital age, namely what kind of use would be considered “fair use” and therefore permissable under the law?

Well, a little more than a year later, the case has been dismissed by U.S. District Judge Alvin Hellerstein.  The judge dropped the case, citing a “suggestion of settlement” between Fairey and the Associated Press. The claims could be reinstated within a month, however, if either side requests it.

What did remain in play, however, were related claims between the AP and a clothing manufacturer affiliated with Fairey that marketed and sold more than 230,000 products based on the Obama image. That case is generally considered a more typical copyright infringement case and is expected to go to a civil trial in March.

In papers filed last week, the AP said the case presents “the straightforward question of whether a T-shirt company may use a nearly verbatim copy of a copyrighted image to generate millions in dollars of revenues for itself without securing the permission of the copyright owner.”

But regardless of how this civil case case is resolved, it now looks like greater question of “What is ‘fair use’ in the digital age?”  will remain unanswered.