![Mitigate value-destroying legal risk. For Fox, Kossovsky said. “This new reputation at FOX Corporation, if it [is] indeed forming, is or will be value-destroying.”](https://steelcityre.com/wp-content/uploads/2023/10/20231016b-Steel-City-Re.jpg)
Fox experienced a surge in reputational risk in the summer of 2021, according to reputational risk insurance provider Steel City Re’s resilience monitor. […] “Reputation risk is usually triggered by missed expectations,” Kossovsky said. “Arguably, stakeholders expected that Rupert Murdoch would once again pull the organization back from the brink after an ethically questionable strategy went sour. They’ve been disappointed.”
In the past six months, more than $130 billion in shareholder value was lost by 39 banks due to reputational risk—the risk of unmet stakeholder expectations resulting in incinerated business value–flawed stakeholder intelligence.
Steel City Re CEO and former Los Angeles County deputy coroner on what derailed the ESG movement & what boards expect from risk management in the aftermath.
CEO’s Conviction SEC Charges. “Boards should demand… intelligence on stakeholder expectations,” said Kossovsky.
![A CEO and former Los Angeles County deputy coroner on what he feels derailed the ESG movement […] ESG died from toxicity and dysfunctionality. Culpable parties include investors, fund managers, corporate communicators and politicians.](https://steelcityre.com/wp-content/uploads/2023/10/20231006-Steel-City-Re.jpg)
A CEO and former Los Angeles County deputy coroner on what he feels derailed the ESG movement […] ESG died from toxicity and dysfunctionality. Culpable parties include investors, fund managers, corporate communicators and politicians.
![In a world of polycrisis, […] risk managers need to… market the elevated quality of their risk management processes.](https://steelcityre.com/wp-content/uploads/2023/09/20230926-Steel-City-Re.jpg)
In a world of polycrisis, […] risk managers need to… market the elevated quality of their risk management processes. The author thanks for their contributions to this article:
Courtney Davis Curtis, University of Chicago; Deyna Feng, Cummins, Inc.; Mary C. Friedl, Redbox; Kathleen A. Graham, The HQ Companies; Chris Hammond, Stepan; Enya He, Blu Clarity PBC; Carnell R. Jones, Trinitas Ventures; Christy Kaufman, Zillow Group; John C. Kline, Discover Financial Services; Manuel Padilla, MacAndrews & Forbes Incorporated; Soubhagya Parija, FirstEnergy and New York Power Authority; Kristen Peed, CBIZ; Theresa Severson, Kite Realty Group; Seung Yoo, Regal Rexnord Corporation; and Denise Williamee, Steel City Re.
“Lightning does strike,” (Kossovsky) said, but firms that can demonstrate that they have developed effective governance systems and implemented thoughtful risk management experience a much different impact: “That’s where enterprise risk management creates value.”
Backlash Over AI Work. Companies can mitigate the risk of backlash by encouraging collaboration between IT, enterprise risk management and communications within the organization, as well as getting the board involved in overseeing the risk management process, said Steel City Re’s Kossovsky.
Southwest Airlines (LUV) equity returns at 193 days normalized to the S&P500 returns are -10.3% (predicted based on historic reputation risk for LUV: -7.0%). It is under performing the Dow Jones US Airlines Index (DJUSAR) by 28.7%. The implied loss to shareholders is $2bn.
Record high profit risk. Experts warn that exuberant price increases may come with reputational risks. “Boards should communicate that the firm’s risk management process…is thoughtful, dutifully overseen, and applies to everything that is mission critical, Kossovsky wrote.