March 25, 2023

Yes, reputation is insurable.

Yes, reputation is insurable. That’s the opinion of several carriers and agencies interviewed by Law360. “The proportion of the asset base of larger companies, and for the majority of companies these days, has shifted from the tangible and physical to the intangible. Reputation and brand are a core part of that,” Neil Kempston, head of Beazley’s Incubation Underwriting team, told Law360. […] Steel City Re instead offers parametric coverage, in which after some reputational loss, the insurer automatically applies a preset coverage amount based on the level of reputation impairment once a policy is found to be triggered.

March 16, 2023

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Child labor in supply chains. Think about reputation risk management now as a potential differentiator and a competitive advantage.

The U.S. Department of Labor has now launched an investigation and said it will hold not only companies that employ child labor accountable, but the larger, better known companies that have child labor in their supply chains. The new regulatory stakeholders in companies’ supply chains bring with them investors and litigators, who had material financial consequences to activities already being followed by activists.

March 7, 2023

Intelligence Unit Briefing. Proxy campaigns are becoming personal. The SEC is zeroing in on risk oversight. All risks, including ESG and reputation, are connected.

Intelligence Unit Briefing. Proxy campaigns are becoming personal. The SEC is zeroing in on risk oversight. All risks, including ESG and reputation, are connected.

March 3, 2023

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ESG rhetoric pledge regrets. “You may find yourself facing angry investors and determined regulators (with) powers to make things very personal.”

ESG rhetoric pledge regrets. With ESG becoming as important to some companies as EBITDA and marketing departments ramping up the ESG rhetoric, the effective scope of dutiful oversight has expanded…The Delaware court increasingly sees oversight of all things mission-critical as a board duty.

February 28, 2023

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Companies need an authenticated forward-looking oversight process to manage risk strategically.

“For the first time since its landmark Caremark decision, the Delaware Chancery Court has allowed a breach of oversight claim to proceed against a corporate officer when it declined to dismiss claims brought by stockholders against David Fairhurst, McDonald’s former head of human resources…”.[kos] The bottom line is that law and society are expecting better management and oversight—a touch of common sense many would say—and that disappointment (read, shift in expectations leading to anger and disappointment, aka, reputation crisis) is playing out in the courts….Companies and boards need a solid, universally applicable management and oversight process that is forward-looking to manage risk strategically. The quality of that process needs to be proactively authenticated with insurance. Compliance-focused controls, which by design are backward looking—and the audits that authenticate them—are necessary but with the evolving expectations of society, apparently no longer sufficient.

February 21, 2023

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Thoughtful Risk Management and Dutiful Oversight Agenda

The settlement with Activision Blizzard could have widespread implications for how companies choose to manage risk, according to Nir Kossovsky, CEO of Steel City Re, which provides insurance for reputation and assists companies in establishing risk management functions. Kossovsky said that companies should create “reputation risk leadership committees” composed of representatives from “every silo” of the company that interacts with a critical stakeholder group…“No one can argue with thoughtful risk management and dutiful oversight, but you need a demonstrable, effective process to make that claim.”

February 20, 2023

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Mission critical risk denial can be costly. It is an ongoing reputational crisis…(due to) poor risk management and governance.

Mission critical risk denial can be costly. A holiday flight cancellation fiasco by Southwest Airlines crushed the company’s market capitalization and caused the company to take an $800 million dollar write-down for Q4 and record losses three times greater than analysts had expected. Equity returns 42 days into the crisis show Southwest trailing the Dow Jones U.S. Airlines Index by 18.4%. Had it merely kept pace with that index, Southwest’s market cap would have been more than $3.3 billion higher.

February 12, 2023

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Demonstrating Quality and Effectiveness—not merely effort—is one of the strategic benefits of ESG and reputation insurances.

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.

February 7, 2023

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All risk is connected. As in Dirk Gently’s world, everything in the risk world is now connected, but without the humor of Douglas Adams. The consequences of operational perils between and among employees—the sorts of things that might have triggered coverage with Employment Practice Liability insurance, is now a matter for derivative litigation and the SEC.