February 12, 2023

Demonstrating Quality and Effectiveness

Demonstrating Quality and Effectiveness. In this recent post by the National Association of Corporate Directors, the lawyer authors write, “Documenting the board’s activities is a critical component of demonstrating management’s efforts to monitor relevant risks and board review of these efforts.” Under the DoJ’s enhanced enforcement guidelines, simply demonstrating effort is not sufficient. Demonstrating effectiveness—not merely effort—is crucial; and it is one of the strategic benefits of ESG and reputation insurances.

Click on the image above to see thre video. Click here to read the article. (No Paywall).

Steel City Re is an insurance intermediary and risk advisor for reputation value and ESG-linked reputation risk. We offer solutions for measuring reputational risk and reputational value, governance strategies for overseeing reputation risk management frameworks, insurance, and reinsurance. Reputation and ESG insurance and reinsurance are strategic instruments boards use to signal to investors, bond raters, and the courts (and regulators) that their governance processes are effective.

Reputation is Mission-Critical

Demonstrating Quality and Effectiveness. Oversight of “mission- critical” issues can forestall a broad range of costly issues associated with angry disappointed stakeholders. Losses accrue as companies lose the ability to sell more, faster, and at premium prices; to obtain labor, vendor services, as well as capital on preferred terms; to outperform competitors, deter activists, and assuage regulators. Public manifestations include litigation, regulatory opprobrium and adverse media attention.

A program for reputation resilience, comprising both risk management and insurance (reinsurance)-authenticated oversight for all that is mission-critical, can create value in many ways. To this end, Steel City Re offers a Reputation Resilience Program.

Having a robust Reputation Resilience Program in place offers, amongst other benefits:

• Protection for the company, its staff, executives, and board from litigation and regulatory challenges
• Improved governance processes and better enterprise risk management protocols; i.e., measuring reputational risk
• Establishment of an agile operating, communications, and decision-making team, with clear roles and responsibilities, trained and ready to handle all reputational threats; i.e., a reputation risk management framework
• Proactive management of risks that could give rise to delays or derailing concerns around new product and strategic partnership launches
• Captured behavioral economic value from stakeholders; i.e., value of reputation
• Reduced costs of debt and risk transfer while boosting equity value; i.e., boosting reputational value

A hazard of reputation risk is a lurking gap between stakeholder expectations and reality. Another hazard is the emotional intensity associated with expectations. The peril is anger from disappointed stakeholders. This video and this written summary explain the behavioral economic features of the many perils of reputation risk.

Demonstrating Quality and Effectiveness. Mitigating risk strategically through expectation management and operational adjustments evinces thoughtful management and dutiful governance. Financing such risks evinces prudence, and doing so publicly enables stakeholders to appreciate and value the effort. These comprise the core of Steel City Re’s professional services.

One Question

Demonstrating Quality and Effectiveness. ESG-linked reputation risks are prevalent and material. Are reinsurance and insurance for ESG-linked reputation risk part of your strategy?