Reputational risk – Is it overstated?
The growing importance of reputation and brand to businesses is reflected in the fact regulators increasingly favour ‘name and shame’ approaches for compliance breaches. As well as meeting public demands for greater transparency and accountability, reputational sanctions are seen as being more effective at changing behaviours than financial ones. This comes at a time when the risk register for businesses continues to grow. As well as the need to demonstrate financial stability, firms are also expected to be seen to be acting responsibly on everything from paying corporation taxes and reducing energy usage to data protection.
Social media also continues to pose fresh challenges. A single tweet from a disgruntled customer or employee can rapidly snowball into a major global media story. Organisations can also now find themselves embroiled in ‘fake news’ stories.
But are some of these risks overstated? If so, what is the best approach for organisations to determine the appropriate responses and controls to ensure their efforts are focused on those which do pose a serious threat. How can financial services firms protect brand and reputation without becoming too risk-averse and losing their ‘human’ face?