And while Facebook CEO Mark Zuckerberg seems to have dodged the bullets fired his way during a Congressional hearing last month (did you #deletefacebook ?), Cambridge Analytica’s leadership knew that, based on its actions and the cavalcade of accusations, neither their clients nor the public would ever “like” them again.”
Last year, Steel City Re CEO Nir Kossovsky wrote for Risk Management Monitor about reputational risk—reflecting on it and warning of the consequences to an organization. When public anger rises, he said, “more blame is being cast upon recognizable targets, such as CEOs.”
“This once again demonstrates how attacks in the court of public opinion can cripple a business. Despite a fast reaction and being exonerated by a credible authority, no amount of crisis management and communication could make up for the actions of Cambridge Analytica’s leadership. It also seems that the company had not considered a business continuity plan for a reputation crisis of this magnitude.May 4, 2018
National Law Review
“When public anger rises, (Kossovsky) said, “more blame is being cast upon recognizable targets, such as CEOs.”
Reputation crisis: disappointment, diminished trust, causing economic losses.
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.
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.
One Last Question
Are ESG insurance or reputation insurance part of your strategy?