Managing Reputation Risk
Nir Kossovsky, CEO of Steel City Re has written extensively about reputation risk. in his most recent post (https://riskandinsurance.com/trust-risk-management-to-handle-reputational-risk/) he notes that in the past 12 months 25 complaints were filed in federal court against corporate boards for alleged damage to corporate reputations, compared with six in the preceding year. While nine out of ten S&P 500 companies cite reputation as a material risk in their public filings, most of them treat it as a marketing issue. This may boost their image for environmental, social and governance responsibility but if their practice does not live up to their promises their reputations will suffer when a disaster strikes.
Kossovsky maintains that organizations need to address reputation through risk management rather than marketing. Risk managers have the ability to enforce best practices to prevent major losses or minimize their effects when they happen. They can place insurance that will provide resources to manage a crisis. Although Kossovsky does not use those words, they can ensure organizations walk the walk, not just talk the talk.
Your organization does not have to be an S&P 500 company to have a reputation. You do not need a risk manager to tell you that your practices must live up to your advertising. A business may survive a physical loss, but once its reputation is lost it may be impossible to regain.