Reputation is an informed stakeholder expectation—an emotionally-laden complex product of social, political and economic factors—that boards and CEOs have a duty to protect.
Measurement is a part of good risk governance and risk management. The value measure of an organization’s reputation, an intangible asset, is the accumulated revenue and cost-savings arising from stakeholders’ expectations of experiential or remunerative benefits from an association, product, or service. Healthy corporate reputations create a value premium. Companies can sell more, faster, and at a higher price; obtain labor, vendor and supplier services, and capital at a lower cost, and hold both regulators and activists at bay.
Features of Risk
Risk, an economic threat to enterprise value, lurks in the gap between stakeholder expectations and operational reality. The features of reputation risk typically include economic harm from angry, disappointed stakeholders that is often exacerbated by media amplification. Social media is an accelerant. Steel City Re helps executives, companies, and sovereign entities identify and defend against these risks by mitigating the hazards.
Cost of Loss
Reputation value loss and crises comprise widespread stakeholder disappointment and diminished trust, causing go-forward economic losses . Disappointed stakeholders destroy value by becoming disloyal customers, disengaged employees, distracted suppliers, distrustful creditors, dismissive investors, and determined litigators & regulators. When stakeholders are disappointed, the additional costs of the long tail of impaired reputation value can amplify operational losses by 200% to 700%.
ROI of Risk Management & Governance
Companies that mitigate reputational risk with risk management, financing, and insurances from Steel City Re can dissuade reputational attacks, thereby reducing the cost of negative events, the ensuing media coverage, and the costly tail of impaired cash flow. Our products reduce boards’ exposure to shareholder derivative suit liability and companies’ cost of capital at the same time. Investors, regulators, and litigators, by appreciating and valuing risk management, create additional value through their actions.