Managing reputation and stakeholders

Ariane Chapelle and Carmen Rollins

Reputation damage is one of the worst consequences of non-financial risk events. All the organisations we have met and worked with over the years include a “reputation impact” category as part of the risk assessment matrix, and, when interviewed, many mention reputational impact as a dire consequence of operational risk events as diverse as fraud, systems disruptions, compliance breach or even processing errors.

Yet none of these organisations either defines reputation impact or reputation risk with any precision. For many firms across the financial industry, reputational damage is simply synonymous with adverse press coverage, whether local or international. Furthermore, we have not met any financial services company, or an international financial organisation, that has attempted to measure the impact of reputation damage on the behaviours of stakeholders such as customers, regulators or staff. This lack of focus, structure and measurement, including clear definitions of reputation as an impact versus reputation risk, is puzzling.

This chapter proposes a new framework from the management of corporate reputation. Inspired by the risk management cycle, it focuses on the