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Top Ten Most Corrupt States in the U.S.

Most Corrupt States

A new study from researchers at Indiana University and City University of Hong Kong on the most and least corrupt states in America calculates that government corruption costs American taxpayers tens of billions of dollars a year. In the 10 most corrupt states, for example, simply reducing corruption to an average level would lower annual state spending by $1,308 per person, or 5.2 percent of state expenditures.

In “The Impact of Public Officials’ Corruption on the Size and Allocation of U.S. State Spending,” Cheol Liu, assistant professor in the Department of Public Policy at City University of Hong Kong, and John Mikesell, Chancellor’s Professor in the School of Public and Environmental Affairs at Indiana University Bloomington, found that corruption is directly linked to excessive state spending, and noted that corrupt states particularly spend more on construction and capital projects and less on services, including education.

The researchers used data from more than 25,000 convictions for violations of federal anti-corruption laws between 1976 and 2008 to create a “corruption index,” then compared convictions with the number of government employees. This method, they explained, avoids the issue of state differences in police, prosecution and court resources, making the results a reflection of the extent of corruption, not of law enforcement effort.

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 Defining corruption as the “misuse of public office for private gain,” the authors found that public and private corruption can have a range of negative effects, including lower-quality work, reduced economic productivity and higher levels of income inequality and poverty.

According to the study, the top 10 most corrupt states are:

  1. Mississippi
  2. Louisiana
  3. Tennessee
  4. Illinois
  5. Pennsylvania
  6. Alabama
  7. Alaska
  8. South Dakota
  9. Kentucky
  10. Florida

“The results of this article suggest that preventing public officials’ corruption and restraining spending induced by public corruption should accompany other efforts at fiscal constraint. Increases in states’ expenditures on capital, construction, highways and borrowing are not problematic in themselves,” the researchers concluded.

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“However, policymakers should pay close attention that public resources are not used for private gains of the few, but rather distributed effectively and fairly.”

Reputational Risk Draws Increased Board Awareness, But Not Action

In its fifth annual board of directors survey, “Concerns About Risks Confronting Boards,” EisnerAmper surveyed directors serving on the boards of more than 250 publicly traded, private, not-for-profit, and private equity-owned companies to find out what is being discussed in American boardrooms and, in turn, what those boards are accomplishing as a result.

According to the report, reputation remains the top concern across a range of industries:

Most Important Risks

“The financial cost and damage to reputation from a cyber/privacy breach is growing exponentially,” said Nancy Brady, EisnerAmper’s director of IT risk services. “Directors have recognized the increasing risk companies face related to cyber/data security.

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Now they need to roll up their sleeves and, with the companies, address these risks.”

While reputational risk remained the top concern of respondents, the survey found that companies are not necessarily translating awareness into action. In fact, only 31% said they were concerned about crisis management.

“There were a surprising amount—close to a quarter of respondents—who had no plans, and others just informally ‘doing their best.

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‘ This lack of formality to address the most significant risk identified existed across all organizations,” the report said.

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“When plans existed, they included both everyday operations—such as to keep a positive reputation and reduce the risk—and strategies to address a crisis affecting reputation.”

Despite the minimal plans in place, the directors surveyed seem to hold themselves and other company executives primarily responsible for the response to a reputational crisis. When asked who is responsible for executing such a plan, they reported:

responding to reputational risk crises

Respondents also showed improving confidence in the performance of the board, committees, external auditors and accounting departments.

How well is board addressing risks

Click here for the full report from EisnerAmper.

Strength in Numbers: Internet Risk Detection and Brand Protection

Many of the attacks launched against today’s brands are as covert as they are debilitating. In today’s connected age, savvy cyber criminals often blitz companies with a flurry of activity across an array of online channels.

To make matters worse, employees who are using the Internet casually or personally create a vulnerability for businesses: workers could click on a phishing link sent to their personal account and unknowingly be exploited by cyber criminals, or they could bring harm to the business via a social media post they thought to be harmless.

And, let’s not forget that brands can also inflict damage on themselves, such as through executive scandals, accounting errors or failing to protect customers and investors.

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Even though these events may not involve a malevolent, third-party attacker, the resulting fallout can be just as severe as if they fell prey to one.

Given these circumstances, companies could face a barrage of both external and internal threats to their brand, customer loyalty and bottom line.

So, how can they defend themselves? The same crisis management procedures brands use following an external attack should also extend to self-inflicted events. Every reliable, robust brand defense strategy should begin with an Internet Reputation Management Council (IRMC).

The Power of Many

No one stakeholder within a company can be solely responsible for online brand reputation management. Instead, businesses need to bridge the gap between departments, creating an environment in which employees across the marketing, security/IT, finance and legal departments unite and share resources to defend the brand—and it all begins with an IRMC.

Council members representing departments throughout the organization will become Internet reputation champions who work collaboratively, from within their individual departments, to ensure that ownership and management of the brand is carried out across the enterprise.

As such, an IRMC has the range and visibility to combat the multitude of Internet-based threats. To borrow a term from the military, an enterprise that deploys an IRMC is essentially following a “defense-in-depth” strategy, by creating a redundant, layered web of defenders.

The Members of an IRMC

Once a company decides to launch a cross-departmental IRMC, who makes up its members? Executive-level sponsorship will provide the vision for an Internet reputation strategy, facilitate cross-functional and resource collaboration, and build a brand-aware organizational culture. A team leader is responsible for executing that vision on a day-to-day basis and marshaling the resources needed to protect the brand. Area leaders will protect the brand from various departments within a business, including marketing, legal, investor relations, compliance, e-business, human resources, public relations, security and fraud, and IT.

Although all IRMC roles are important, it’s these area leaders who can make or break a brand’s Internet reputation.

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A successful response demands the full participation of every member of an IRMC. Even though response actions may be centered in one department, these crises are full-company situations.

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After all, it’s not as though the public would only render judgment in isolation, for example, against “Target’s security team” or “Yahoo’s executive search committee”—the entire brand is put under a microscope following an incident.

A Defender at Every Position

With an effective IRMC, companies like these can use the “power of many” to combat such Internet-based threats to their brand, even when they’re self-inflicted. An IRMC operates by:

  • Identifying key internal stakeholders and inviting them to collaboratively establish the guidelines of Internet reputation management within the company
  • Meeting regularly to keep abreast of industry and technology changes, as well as emerging forms of Internet-based threats
  • Establishing goals and targets, such as building a structure to set up a “Best of Breed Governance Policy,” and setting metrics to track performance
  • Preparing emergency response protocols
  • Implementing training policies and communication within each department
  • Reviewing, measuring, evaluating and managing progress against objectives

Although a fairly new concept, there are already real-world examples of effective IRMCs. AstraZeneca’s reputation council, for example, comprises a diverse group of those with “stakeholder responsibilities,” including representatives from sales, marketing, finance, human resources and communications. It reports directly to the CEO, and because of this structure, long-term risk management and prevention are infused into the company’s corporate focus.

Ultimately, the true value of an IRMC like AstraZeneca’s isn’t in how many attacks it directly neutralizes, but that it creates an organizational culture of Internet reputation management excellence, starting with the heads of core departments and working its way throughout the rest of the enterprise.

By the time the IRMC is engaged responding to an incident, significant damage has already occurred. The best-protected brands are those that have identified brand protection as a central part of their mission statements. Their investment in a culture of excellence, led by their IMRC, mitigates risks before they become reality, improves profits and creates value for customers, employees and other stakeholders.

6.5 Million U.S. Homes Worth Nearly $1.5 Trillion at Risk of Hurricane Storm Surge Damage

Storm Surge Flooding MISHELLA / Shutterstock.com

More than 6.5 million homes along the U.S. Atlantic and Gulf coasts are at risk of storm surge inundation, representing nearly $1.5 trillion in total potential reconstruction costs, according to Corelogic’s 2014 Storm Surge Report. Of that risk, more than $986 billion is concentrated within 15 major metropolitan areas.

While many homes and businesses most vulnerable to hurricane damage are in Federal Emergency Management Agency flood zones, these represent just a fraction of the structures that suffer a hurricane’s effects.

Homeowners who live outside the FEMA flood zones typically do not carry flood insurance, given that there is no mandate to do so, and therefore may not be aware of the potential risk storm surge poses to their properties, Corelogic explains.

Uncertainty about the geographical and meteorological risks may lull many into a false sense of safety.
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“This year’s season is projected to be slightly below normal in hurricane activity, but the early arrival of Hurricane Arthur on July 3 is an important reminder that even a low-category hurricane or strong tropical storm can create powerful riptides, modest flooding and cause significant destruction of property,” said Dr. Thomas Jeffery, senior hazard scientist for CoreLogic Spatial Solutions.

Florida ranks number one for the highest number of homes at risk of storm surge damage, with nearly 2.5 million homes at various risk levels and $490 billion in total potential exposure to damage. Here’s how all 19 states studied stack up, based on number of homes at risk:

State Table (Ranked by Number of Homes at Risk)

At the local level, the New York metropolitan area (including northern New Jersey and Long Island) contains not only the highest number of homes at risk for potential storm surge damage (687,412), but also the highest total reconstruction value of homes exposed, at more than $251 billion. Take a look at the storm surge risk for the top 15 metro areas:

Storm Surge Risk for Top 15 Metro Areas

Corelogic also noted variation in the costs of rebuilding, which does not directly correlate to the amount of property at risk. The total reconstruction cost value of homes along the Atlantic coast is nearly 1 billion, for example, which is approximately double the value of at-risk properties in the Gulf region’s 5 billion.