RUINED IN LESS THAN FIVE MINUTES: REPUTATIONAL RISK IN THE DIGITAL AGE
Warren Buffet once said: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” In a digital age where communication through social media is almost instantaneous, a reputation might now be ruined even more quickly.
So why is a reputation so critical to any business? A reputation is based on how others perceive a firm, which can be influenced by different media including word of mouth, media coverage and social media. Strong reputations, especially among the customer base, provide a business with several benefits including trust and loyalty, employee attraction and retention, and the ability to withstand and recover from a crisis. A business with a strong reputational foothold will often attract the talent that can help the firm innovate and drive growth. A positive reputation in the financial services industry is even more critical – particularly in the retail space, where trust and reputation are vital.
It has been widely understood that a firm’s reputation, particularly in the financial services industry, can be damaged, often irreversibly, through just one event or a series of events. Unethical behaviour, lack of transparency, lawsuits and regulatory fines have long been known to cause severe damage to a reputation, as can employee misconduct. Product or service failures – particularly poor customer service – can also cause issues. In recent years, we have seen reputational risks increase in relation to environmental and social impacts of financial services, technology outages and cyber security breaches.
Media coverage of these negative events can spread quickly in the digital age, so managing reputational risk has become very important.
Apr-Jun 2025 Issue
Norton Rose Fulbright LLP