“Having been damaged, Wells Fargo really has only one option: to rebuild its reputation,” he said.
Kossovsky defines reputational risk as the peril of economic or political damage from energized, disappointed stakeholders including customers, employees, regulators, creditors, and investors.
“It’s painful to say that nobody cares about a $1 billion fine, but the general population’s interest in this falls off,” said Dr. Nir Kossovsky, the CEO of Steel City Re, a Pittsburgh insurer of reputational risk. “The additional reputational risk isn’t that great now, but that also means it’s because their reputational value is really low.”
The drumbeat of bad news over the past 19 months has already resulted in economic and reputational damage.
“But a key problem is that Wells may already be perceived as damaged goods, which makes it harder for Sloan and Duke to rebuild.April 20, 2018
“If stakeholders expect more problems, then will a rational person, given a choice, elect to work for the bank, borrow from the bank, do business with the bank?”
Reputation value is a strategic power companies use to sell more, faster, and at premium prices; and to obtain labor, vendor services, as well as capital on preferred terms.
Steel City Re mitigates the hazards of ESG (reputation) risk that threaten reputation value. We use parametric reputation insurances, ESG insurances, and risk management advisory services to make our clients reputationally resilient.
Risk management, risk financing in insurance captives, and risk transfer through reputation insurances comprise the constituent elements of a comprehensive Steel City Re reputation risk governance and management solution.
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Context and Background
Risk managers are now central to the process for managing risks to reputation and that’s a process marketers and communications professionals need to be a part of. The oversight of reputation risk management is mission-critical.
Courts have increasingly been ruling that reputation is a mission critical function and oversight of its management is a responsibility of the board of directors. Courts are also ruling that marketing statements companies make – if they related to issues that affect their reputation, like ESG – may be considered material by investors. Litigation along these lines has yielded large settlements or verdicts for plaintiffs.
And now, the SEC has proposed new rules requiring disclosures by public companies related to their ESG activities; those statements could become a communications and reputational minefield.
As a result, reputation risk management is evolving into an intelligence gathering operation spanning the entire enterprise, roping in the enterprise risk manager, compliance counsel, and increasingly, reporting up to the Chief Legal Officer. There is a growing recognition that reputation is not a product merely of marketing and media coverage, but of the degree to which stakeholders’ expectations are aligned with actual performance. The reputation risk management process requires a thorough and ongoing analysis of stakeholder expectations, the risks of disappointment, and a plan for either managing those expectations or assessing and insuring against the cost of failure.
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