‘Risk’ reporting requires grounding
in facts, broad sourcing
Grace Shim |
By Grace Shim
Business Reporter
Omaha (Neb.) World-Herald
Posted: Aug. 1, 2003
It was the late 1990s, the heady go-go days of the stock market boom. The single
largest transfer of cash took place then. Everyone -- investors, bankers, CEOs,
venture capitalists and fund managers -- got into the game.
The demand to buy stock and to invest was there. The supply of stock was created.
The goal was to take a fledging company public and sell its stock -- and just
maybe get rich.
A short time later, journalists and the public learned about Worldcom, which
filed the largest bankruptcy in U.S. history, and Enron, a name now associated
with dishonesty, creative bookkeeping and corporate collapse.
These stories took center stage at the "Reporting on Risk" session
during the Society of American Business Editors and Writers 2003 conference
in Boston.
More than 170 people attended the conference, which touched on the themes of
the sluggish economy, the bull-turned-bear stock market and recent tales of
corporate greed.
Speaking about risk were: John Rekenthaler, president, Morningstar Associates;
Michael C. Henkel, president, Ibbotson Associates; and Jeff Maggioncalda, president
and CEO, Financial Engines.
The “Reporting on Risk” panelists talked about journalists’ responsibility
to inform readers of just that -- risk.
“Ninety percent of the people on CNBC (financial cable channel) are trying
to sell something,” said Rekenthaler of Morningstar, a Chicago-based independent
investment research firm. “It's a good idea to find out what's wrong with the
latest hot investment.”
Finding out what's wrong can be tricky.
Panelists recommended that journalists tell readers of the possible problems
of a particular investment or to point out past examples of similar investments.
They recommended that journalists remind readers of the basic risks and principles
of investing.
There are risks in all types of investments -- real estate, stocks, long-term
bonds or whatever's hot and selling, Rekenthaler said.
The key to telling the story of risk is to ground yourself in facts from a
variety of expert sources. Panelists said reporters tended to lean on stock
analysts for quick quotes. They also should go to suppliers, distributors and
a broader range of sources.
Writing about risk also has its risks. Speakers said a case such as the Enron
collapse would have been difficult to predict. It's also difficult to warn readers
when a company's stock price continues to rise and a reporter faces the “cult
of past (good) performance.”
Panelists suggested these tips to analyze a company:
- Find out if the company is more or less risky than its peers.
- Find out what forces or trends the company's stock is sensitive to.
- Ask yourself and your experts: What could happen in the next 24 to 36 months?
- Include debt-raters in your source pool.
- Talk to independent research firms and management consultants.
Grace Shim was a 1997 Scholar at The Tennessean in Nashville.
Reach her at Grace.Shim@owh.com.
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