Reputation is the most difficult risk of all - research highlights the opportunities and challenges for Airmic members.

92% of companies believe that reputation is the most challenging category of risk to manage, according to a study from ACE Group conducted across 15 countries within Europe, Middle East and Africa.  

It reveals that, while 81% of companies in the survey see reputation as their most significant asset, most of them admit that they struggle to protect it and identifies a number of key reasons why companies in the region often find reputational risk challenging to manage:

• 77% of companies find it difficult to quantify the financial impact of reputational risk on their business, making it harder to measure than traditional, more tangible risks.
• 68% of companies believe information and advice about how to manage reputational risk is hard to find, compounding the sense of uncertainty and confusion about how best to manage it.
• 66% of companies feel inadequately covered for reputational risk from an insurance perspective.
• 56% of companies say social media has greatly exacerbated the potential for reputational risk to affect their business.

The report also proposes a number of solutions, including:

• Companies need a clear framework for managing reputational risk. Effective management of ‘traditional risks’ will help avoid reputational events, and management teams need to put in place a culture and instil a risk appetite across the company that will reduce the potential for crises to emerge in the first place. In addition, taking a multi-disciplinary approach that involves the CEO, PR specialists and other business leaders will help to build the broader perspective that is necessary for identifying and managing less obvious reputational risks.
• Companies should work harder at measuring how their reputation is perceived. Understanding perceptions of key stakeholders, their interplay and their impact on corporate reputation, is essential for tracking and managing reputational risk effectively. Companies must ensure that they are collecting an “outside-in” perspective to complement their own internal perspective.
• Companies should sharpen up their crisis management plans to keep pace with today’s faster-moving world. Our research suggests that many companies may be over-confident in their abilities to respond to a crisis. Regular review and testing – including the incorporation of social media scenarios – will allow a faster response when disaster strikes.
• The insurance market can do more to help companies manage reputational risk. This includes the provision of more holistic solutions that include crisis response assistance. It also includes helping companies to take a ‘reputational lens’ to more traditional risks to evaluate the reputational consequences in each case.

The survey was conducted by Longitude Research. Their managing director Gareth Lofthouse said that reputation was of key strategic importance. “The managing director really cannot escape responsibility for this issue,” he said.

Comment – “Will the insurance market ever cover reputation?”