Defining and managing reputation risk

Reputation risk is an ongoing yet growing concern for companies. Airmic members report reputational risk as both their number one ‘keep's me awake at night issue' and a high concern for their executive management and Board. This is no surprise in today's world where social media has made it possible for news to travel around the world within minutes and the perception of who you are as a company has a direct impact on several factors, including sales, stock price and licence to operate.

High-profile incidents such as BP's Deepwater Horizon oil spill disaster in 2010 alert companies that a reputational problem can cause short-term issues to develop into long-term impacts including reduced profits, loss of customers and key employees, and eventually a slump in share price.

The objective of the guide is to enable risk managers to lead an organisation's approach to reputational risk management. The guidance sets out a framework for breaking down the elements of an organisation that govern its reputation. Risk managers can use this framework to identify the possible risk events that affect each of these dimensions, and the stakeholders that are subsequently affected. This will allow for a structured approach to managing reputational risk.