RC: How critical is reputational risk to a business and what are the major threats to a firm’s reputation in today’s business climate?

Suplina: Reputational risk is an ongoing and continuing threat to all companies, and one that continues to rate highly with each and every client. A damaged reputation can have severe consequences, potentially affecting all internal and external stakeholders, share price and revenues. Reputational incidents can also be incredibly costly and take up valuable management time, diverting valuable assets away from revenue generation. In the 2013 Exploring Strategic Risk Deloitte Survey conducted by Forbes Insight, reputation was the highest risk identified, with the speed and reach of social media and the fear of losing control being one of the main factors driving rising concerns about reputation, according to Deloitte’s ‘Exploring Strategic Risk: A global survey’. There are myriad issues that could cause threats to an organisation’s reputation, however the key risks we would consider as an insurer would include a mishandled class action, a large scale cyber breach from anonymous hackers, and finally, and probably the most important, is an organisation responding poorly to a major incident.

Loeb: In 2010, every major industry sector experienced a monumental reputational crisis – from BP and Toyota to Goldman Sachs and J&J. While simmering from sometime, the events of 2010 animated on a global scale that reputational risk has escalated exponentially but organisational management capacities have remained flat. This capability gap and the risk it creates have put reputation risk management squarely on the priorities radar for corporate boards. Given that the risk travels at the speed of 140 characters or less, it is simply impossible to ‘manage’ reputation reactively. The order of the day is to view reputation as a strategic asset and a strategic risk and afford it the same attention and resources other principal corporate assets receive. With social media serving as a global trading floor for opinion scantily disguised as fact, corporate reputation has never been at greater peril. Companies are now in the advocacy business and must own and distribute the facts that are important to them in the court of public opinion.

Apr-Jun 2014 Issue

AIG Australia


Reputation Institute