Reputational Risk: Managing and Defending the Intangible

Business Insurance

Reputation is an intangible commodity—unable to be properly weighed or measured, and yet highly susceptible to the sway of public opinion. When a company interacts with the public—through a press release, an advert, a product, etc.—it leads with its reputation. However, despite being intangible, reputations are exposed to all manner of risks. Defending against these risks can prove to be a challenge for not only the company but the insurer, who has to define what constitutes reputational indemnity, as well.

While companies are connected to their reputation, they do not truly own them—they belong to the public and are stored within their minds. So what companies really possess are positive or negative perceptions of their brand. This intangibility is the challenge that companies must deal with when managing their reputational risk. To manage their reputation successfully, companies should implement these three best practices:

  • Foster a professional relationship with the media in order to better monitor how your company is perceived. Use social media proactively and successfully to help shape your company’s reputation. Collect and analyse customer feedback.
  • Keep abreast of business, economic, social and regulatory trends that could spawn new risks in order to stay compliant and be prepared. Fostering and managing professional relationships with regulators can provide your company with more in-depth insight into current and upcoming regulations.
  • Identify potentially adversarial special interest groups and initiate a professional relationship with them.

For all the work and proactive measures that companies may implement, their reputations are still fragile commodities that are controlled by their various business channels. While each channel offers its own unique risks, foreign supply chains may offer some of the most damaging. Using foreign supply chains restricts companies’ operational control, leaving their reputation vulnerable to unethical or unfavourable business decisions undertaken by their business partners—if a supplier engages in unethical behaviour, your company’s reputation will certainly be damaged. Issues such as unfair treatment of workers and non-environmentally friendly operations have prompted many UK companies to reshore for greater reputational cover.