Study on Practices on Reputational Risk Management in the Banking System

Abstract

Abstract This paper explores the definitions surrounding reputational risk in banking with the purpose of identifying the reputational risk factors and the efficient management that can forecast, minimize and evaluate them. Although the concept is not new, only recently has the banking system started to acknowledge the true implications of a negative reputation and has begun to focus on how to find ways to prevent and mitigate this risk. Before the last economic collapse, the banking management had used to have more knowledge about financial risks than about the non-financial ones, the reputational risk had been neglected or even confused with other types of risks. After the crisis it became critical to be aware of hazards that could cause reputation damage in order to develop a framework for managing reputational risk prior to an issue. The banking system has realized that reputation is the most valuable asset and has begun to invest in elaborating a proper risk management strategy.