The Jenga of Conflict Minerals Reputation Risk

By now, you have almost certainly seen the Newsweek article on conflict minerals that targets Apple.  The article contains quotes from a number of conflict experts, including us (of course we have to mention that) and our friend Michael Littenberg.  Michael commented on the reputational risk aspect of conflict minerals, including the investment community.  While we agree in principle, our view is that the matter is more complicated than it appears on its face.

Late last year, we offered our commentary and referred to an article written by Norman Marks, a highly respected governance expert.  The sound byte we extracted from Norman’s thoughts:  reputational risk response should not be considered on an isolated basis.   Making aggressive corporate commitments to mitigate reputational risk impacts may have critical negative results in other ways.  For instance, a commitment to limiting purchases of electronic components to conflict free sources may address reputational risk and could also consolidate purchasing power, but it also negatively impacts supply chain resiliency in the event of a disruption.

Every company should attempt to identify and evaluate the different facets of, and linkage between, reputational risk of conflict minerals and other aspects of the business.

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