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Managing Reputational Risk

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A simple approach to Reputational Risk Management

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Managing Reputational Risk

  1. 1. Managing reputational risk Eneni Oduwole Jan. 2009
  2. 2. Contents <ul><li>What is reputation? </li></ul><ul><li>Attributes of reputation </li></ul><ul><li>How can reputation be damaged? </li></ul><ul><li>What is reputational risk management? </li></ul><ul><li>Attributes of reputational risk management </li></ul><ul><li>Benefits of reputational risk management </li></ul><ul><li>Managing reputational risk </li></ul><ul><li>Rating reputational risk </li></ul><ul><li>Indicators of levels of reputational risk </li></ul>
  3. 3. What is reputation? <ul><li>It is : </li></ul><ul><ul><li>an intangible asset </li></ul></ul><ul><ul><li>not a brand </li></ul></ul><ul><ul><li>the sum total of all stakeholders’ experience </li></ul></ul><ul><ul><li>public information regarding an organization’s trustworthiness </li></ul></ul><ul><li>It also assures: </li></ul><ul><ul><li>premium value growth opportunities to shareholders (value growth resulting from managerial experience, innovation, intellectual property) </li></ul></ul><ul><ul><li>continued comparative advantage </li></ul></ul>
  4. 4. Attributes of Reputation
  5. 5. How can reputation be damaged? <ul><li>Actions that result in stakeholders lose of trust and confidence </li></ul><ul><li>Public perception of organization’s standards drop </li></ul><ul><li>Sudden change of management; no succession planning </li></ul><ul><li>Adverse regulatory reports and sanctions </li></ul><ul><li>Increased incidences of fraud </li></ul><ul><li>Consistent unfavourable ratings </li></ul><ul><li>Continued decline in share price </li></ul>
  6. 6. What is Reputational Risk Management? <ul><li>It is the current and prospective impact on earnings and capital arising from negative public opinion </li></ul><ul><li>It measures the change in perception of a company </li></ul><ul><li>It is linked with customer expectations regarding an organization’s ability to conduct business securely and responsibly </li></ul>
  7. 7. Attributes of Reputational Risk
  8. 8. Benefits of Reputational Risk Management <ul><li>Identifies key risks that can affect an organization's reputation adversely </li></ul><ul><li>Assesses potential impact </li></ul><ul><li>Ensures timely and appropriate response to adverse public criticisms </li></ul><ul><li>Enables a good work culture is promoted by Management </li></ul><ul><li>Ensures effective communication and disclosure to all stakeholders </li></ul><ul><li>Promotes commitment and trust between all stakeholders </li></ul>
  9. 9. Managing Reputational Risk <ul><li>Understand the value of the organization's reputation </li></ul><ul><li>Treat reputational risk management holistically; understand inter-relationships within the business </li></ul><ul><li>Have effective internal control & enterprise risk management frameworks </li></ul><ul><li>Identify and prioritize relevant risk factors; communicate key risk areas to Management </li></ul><ul><li>Ensure that an effective business continuity management plan is in place </li></ul><ul><li>Build a culture of recruiting excellent people and effective people management practices </li></ul>Value your Customers
  10. 10. Rating Reputational Risk <ul><li>Reputational Risk can be rated as: </li></ul>
  11. 11. Indicators of levels of Reputational risk <ul><li>Indicators of Low risks include: </li></ul>Management fosters a well supported sound culture across the organization Management fosters a well supported sound culture across the organization
  12. 12. Indicators of levels of Reputational risk (co’td) <ul><li>Indicators of Moderate / Medium risks include: </li></ul>Management fosters a well supported sound culture across the organization The firm adequately self-regulates its risks Losses from fiduciary activities are manageable (whether no. of accounts, volume of assets, increased litigation or customer complaints)
  13. 13. Indicators of levels of Reputational risk (co’td) <ul><li>Indicators of High risks include: </li></ul>Management fosters a well supported sound culture across the organization

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