Companies need a common framework for reputational risk, says report
A lack of communication between risk managers and corporate communications departments could leave companies exposed to reputational risk, according to a joint report published by Airmic, the Risk and Insurance Management Society (RIMS) and the RepTrak Company.
The report, titled Closing the Gaps on Reputational Risk Management, highlighted a number of challenges for risk managers in analysing reputational risk, many of which revolved around a lack of clarity regarding definitions.
There is no clear definition of reputation, how it is measured or what business impacts companies take from reputational risk, the report noted. Neither is there a framework for linking the strategic, operational, and tactical aspects of reputational risk management.
The report argued that risk professionals can contribute value to their organisations by implementing structured, data-driven and systematic approaches to reputational risk, drawing the whole organisation together around a common framework.
It also warned of an absence of integrated ownership and accountability across organisations regarding reputation. The development of solutions for risk transfer, including insurance, has been slow, the report found.
The report commissioned interviews with over 40 leading risk professionals in Europe and the US to discuss how reputational risk management can be improved.
Hoe-Yeong Loke, research manager at Airmic, said: “As organisations manage issues arising from the COVID-19 pandemic, they face increasingly interconnected and complex risks. Reputational risk takes on even greater importance. Previous studies from Airmic and RIMS suggest that the risk community continues to struggle with reputational risk, and with reputation as an intangible asset. There is a gap between what senior executives and risk professionals know is important to manage and the work that is being done.”
Carol Fox, vice president of strategic initiatives at RIMS, said: “Greater collaboration between risk and corporate communications professionals in using data to detect reputational risk early on helps unlock reputational value as well as produce an agile and decisive crisis management response.”
Kasper Ulf Nielsen, RepTrak's chief strategy officer and co-founder, added: “Most organisations deal with reputational risk at the operational level only. This is not out of choice, but because they lack the data and framework to bring the operational and the strategic together.”