Over the past decade, online reputational risk has evolved to become a serious emerging threat to businesses. It is now a leading board-level concern, with the majority of company executives stating that it is the single hardest area of risk to manage. According to Polecat Intelligence, a leading reputational data intelligence company, up to 90% of companies report having inadequate data to manage their reputation and most lack the real-time insights to anticipate and manage emerging threats.
At a time of seismic cultural and social change, reputation is a new front line for companies in the battle for customers who increasingly expect firms to take their social, environmental and cultural responsibilities seriously and to practice what they preach. One doesn’t have to think too hard for examples of successful brands that have been damaged by the identification and amplification of negative online media – from the discovery of exploitation within supply chains to carbon emission cover-ups.
In addition, companies find themselves the targets of a diverse range of actors. Since 2016, 80% of global companies have seen hostile scrutiny of their business conduct increase, with activist protests targeted at business more than doubling over the period.
With 80% of the total value of the average company now comprised of intangible assets like intellectual property, trademarks and reputation, the insurance industry faces an urgent need to evolve the services offered to companies and build better solutions that cater to the risks facing these types of assets.
How is reputational risk changing?
We have been living in the age of ‘fake news’ for some time; adherence to the legal and ethical protocols that existed to provide fact-checked news and opinion for public consumption can no longer be considered the norm. We are at a point where state and non-state actors are easily able to manipulate public opinion, whether hacking the Brexit debate or influencing the US presidential election.
The difficulty in separating facts from fiction mean that companies are operating in a volatile environment. Not only can minor issues get escalated into a longer-term problem, but allegatory materials posted online could spark a crisis at any time; we now have numerous content super-producers walking our streets. Someone with one or two tangible relationships can reach millions of people with the tap of a button. Sasha Baron Cohen, in a 2019 speech at the Anti-Defamation League, warned of the implication that millions now have unbridled ‘freedom of reach’ as well as freedom of speech.
These trends have driven our own view that protecting reputation is the overwhelming challenge faced by many companies today. However, the problem for insurers has been to understand how insurance can best help companies to mitigate this largely intangible threat. At Beazley we have established that companies have a requirement above all for:
- Signals intelligence to help them define the reputational threats facing their business.
- An insurance mechanism to protect them against financial losses due to reputation.
- Consultancy services that provide timely crisis mitigation and control advice.
The solution has similarities with cyber coverage, in that the insurance mechanism sits alongside specialist support to help counter the impact of a reputational crisis. However, the trigger is any event or incident that the Policyholder believes would cause a reduction in revenue due to reputational harm, rather than an information security peril. The solution’s ‘all-risks’ nature will unlock a great deal of confidence in companies buying insurance, who are naturally concerned about the ‘unknown unknowns’ in addition to the ‘known unknowns’. A ‘named perils’ approach cannot cater for that reality.
The field of reputation management has shifted in the last 10 years and continues to evolve due to changes in the way the social media giants manage and control content. In addition there is increasing interest from most governments in regulating social media posts, particularly fake news, extremist content, and advertising that manifests as independent endorsements.
Our role is to work alongside companies to help them prepare for and protect against reputational crises, providing protection against financial damage while also advising on crisis management.. Alongside cyber, reputation will be a fast growing market, and we expect to see many more clients looking for support on this issue over the next few years.
Beazley’s reputational risk product
 Ace, 2013, ‘Ace European Risk Briefing’.
 World Intellectual Property Organisation (WIPO), 2016, ‘Intellectual property, finance and economic development’.
 Deloitte, 2020, ‘2020 Insurance Outlook’.
 As covered by The Guardian, 2019, ‘Read Sacha Baron Cohen’s scathing attack on Facebook in full...’