Panic and stock share dump. Thriving in a tornado corridor or flood plain demands fortitude and a reliable risk strategy. The same goes for investing in equity markets. In times of panic — think Southwest Airlines, Norfolk Southern and Silicon Valley Bank — investor moxie may give way to stock share dumps. […] Integrated processes, timely intelligence and good risk communications will help investors appreciate and value risk strategies and not panic.
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.
Risk Strategy Authentication and Communication.If you oversee an effective reputation risk strategy process, but no one knows it, is it actually effective? This is a vital question boards of directors, senior executives, and risk professionals need to ask themselves in this era of enhanced regulatory enforcement. Building resilience requires a demonstrably effective, insurance-authenticated system.
Angry Reactions From Stakeholders. Southwest Airlines promoted five executives as the budget air carrier continues to reel from an operational meltdown that resulted in nearly 17,000 canceled flights over the chaotic holiday travel season. The company said … the moves would “strengthen our operational execution.” […] Nir Kossovsky, an expert on corporate risk and CEO of Steel City Re, told FOX Business that the angry reactions from apparent stakeholders is further evidence that Southwest is going through a “reputational crisis.”
Culture limits risk strategy. Southwest was overwhelmed and unable to adapt as a severe storm swept the US. But behind those specific issues is an insular management team that critics say lacks the imagination and technology expertise to help avoid such crises. […] The carrier has a long-standing reputation of being slow to adopt new technology, and spent years implementing a new reservation system and updating its maintenance operations.
Reputation risk emerges when the expectations of a critical mass of stakeholders shifts, and the value of favorable expectations transforms into the costs of emotionally-rich disappointment. Twitter’s blue check “chaos” shows that the velocity of reputation risk boosted is approaching military-grade speeds.
Shifting expectations: bank run. Douglas Diamond and Philip Dybvig won the Nobel Memorial Prize in economics this year for their work on (bank runs). “A bank run in our model,” they write, “is caused by a shift in expectations, which could depend on almost anything, consistent with the apparently irrational observed behavior of people running on banks.” “Almost anything” could include social media rumors, why not. […] “Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone.”
Silver Bullet for Increasing Risk Velocity and Complexity. During the first six months of 2022, risk velocity and complexity grew, according to a new report from Origami Risk […] Firms need […] to assess, prioritize and develop tactical risk mitigation plans — such as a reputation risk leadership committee — under an overarching strategic plan …
Managing corporate reputation is a lot like mixing a cocktail. Both activities embody the same mission-critical principles: authenticated thoughtful risk management and dutiful governance over everything that is mission critical. Everything in the process is #strategic. At the tactical level, the process begins by understanding what stakeholders expect; and understanding that an effective risk management system comprises risk education and threat intelligence, management, and transfer processes (aka insurance) involving the entire enterprise risk management apparatus bounded by the organizations capabilities.
