DOJ has updated its expectations expanding the potential for reputation risk. Under the new guidelines, prosecutors will consider whether companies have a process for identifying and managing emerging internal and external risks related to the use of new technologies, such as AI, and whether they are integrated into broader enterprise risk management practices.
New this year, the OCC supervisory plan provides updates for third-party-sourced reputation risk and other external exposures.
Boeing employees are striking for…more input into product safety. This labor action is a manifestation of lost reputation value. This labor action is a stark reminder that angry, disappointed employees are one of many expressions of a reputation crisis. Corporate leadership and governors must be mindful that that the long tail of reputation risk typically includes costly investor, regulator, and yes, employee actions.
Reputation risk arises from the failure to meet expectations. All too frequently, reputation risks arising from material operational problems known to insiders are dismissed by those in charge or authority. Nicknames can indicate an issue with ethics, innovation, safety, security, sustainability, and quality. “Junior doctors were referring to Lucy Letby as “Nurse Death” … two years before she was arrested. […] Letby, 34, was sentenced to 15 whole-life orders after she was convicted across two trials of murdering seven babies and attempting to murder seven others.” Board members should note that there are many windows into human resource-based organizational risk.
FTI Consulting’s research found that Board members and those in C-suite executive positions view the reputational risks posed by litigation as the most significant risks facing their businesses. This suggests that litigation risk counts as one of the principal, strategic considerations of large companies, rather than being a purely operational or legal concern.
Seventy-seven per cent of respondents to the July 25 2024 Airmic Big Question said their organisations model and quantify reputational risk – making it the top climate transition risk that their organisations measure. […] With the rise in cases of greenwashing reported around the world, reputational risk – as it relates to the climate transition – has emerged as a top concern.
And now, the last bits of the tail of a reputation crisis. “Hedge fund Elliott Investment Management announced yesterday that it has a $1.9bn position in Southwest Airlines, comprising 11% of the company’s shares. It issued a letter to the airline’s board, calling for new directors, a new CEO, more executives from outside, and a comprehensive business review. In its letter, Elliott wrote, ‘While Southwest has a proud history, that history is not an argument for supporting poor leadership and sticking with a strategy that no longer succeeds in the modern airline industry.’” Relevant podcast on what this means for your company: https://5-minute-aventures-in-risk-resilience.zencast.website
How to protect a firm from the humiliation of corporate swatting by fabulist whistleblowers using the Department of Justice.
Manifestations of complex interconnected risks generally culminate in reputational crises, but they can be managed. Relying only on reporting systems when insiders may become aware of such risks…is not risk management. Reporting systems are unlikely to mitigate federal investigations and follow-on issues because today the risk/reward balance favors whistleblowing over internal reporting. In fact, the rewards of whistleblowing are so great right now that corporate swatting–calling the DoJ or SEC with a hot tip when there is no known issue just to see if something shakes looses–is no longer unthinkable.
Podcast. Reputation Spearheads Resilience at a $150bn Financial Services Company. You Don’t Have to Win A Nobel Prize To Benefit From One.