Reputation Risk

Abstract

Reputation is widely acknowledged as one of the most important corporate assets, but the most difficult to protect. Changes in the environment (e.g., the development of global media and communication channels, and reduced customer loyalty) are exposing organizations to increased reputational risks. Regarded as the “risk of all risks,” reputation risk is a so‐called mega risk due to its compounded nature, for the event that triggers the reputation risk usually also constitutes another (business) risk. Research has indicated that reputation risk has become the main concern for the majority of risk managers due to reputation being regarded as a major source of competitive advantage. Reputation risk oversight has therefore become a core board responsibility and mitigation strategies rest predominantly with organizational management. Reputation risk differs from most other risks in that it presents not only potential negative consequences but, if well managed, an opportunity for improving the organization's reputation.