May 2, 2017

“Even if a bad event is short-lived, the equity markets react quickly, so there may be sharp equity dips. There may be some economic impact even over the short term,” Kossovsky said, “because sharp dips are dog whistles for activists, litigators and corporate raiders.”

That’s not to say, however, that a tarnished brand name doesn’t also impact the bottom line.

Wells Fargo’s scandal involved a violation of ethics, sparked an SEC investigation and forced the resignation of its CEO, John Stumpf. It’s safe to say stakeholders were severely disappointed.

“Activists make a lot of noise that can be channeled through various media, but for the most part in the business world, stakeholders are interested in the goods and services a company offers, not in their political or social views. As long as you can meet stakeholder expectations, you avoid long-term reputational damage.”

“Failures that produce real and lasting damage to reputation include failures of ethics, innovation, safety, security, quality and sustainability,” said Nir Kossovksy, CEO of Steel City Re.

May 2, 2017
Risk & Insurance

“These social media-fueled public relations crises …serve as warning signs of growing reputational risk for corporations.”

Reputation risk management: mitigating both disappointment and noxious media.

Reputations are valuable strategic intangible assets. Threats to these assets⏤ enterprise reputation risks, often mislabeled “brand risks” ⏤ need to be managed, and management needs to be overseen through reputation risk governance lest reputational damage or reputational harm result in long-tailed go-forward losses in economic value and/or political power. Because these intangible risks arise from the interplay of stakeholder expectation, experiences, and media amplification, parametric insurances for intangible asset risks, for reputational value, for reputational harm, and for reputation assurance help mitigate risk by telling a simple, convincing and completely credible story of quality reputation governance to stakeholders. This story telling effect is the expressive power of insurance complementing insurance’s better known instrumental power of indemnification.

Risk management, risk financing in insurance captives, and risk transfer through reputation insurances comprise the constituent elements of a comprehensive solution. What’s your strategy?