Reputation Risk Awareness Grows as Risk Resilience Confidence Slips

Reputation risk is now considered a top-3 risk at more than 1 in 4 companies and a top-5 risk at more than half, according to a new report from WTW.

WTW's 2023 Reputational Risk Readiness Survey Report said that 26 percent of companies now considering reputation a top-3 risk was up from 18 percent in 2021.

The WTW survey polled 375 senior executives from 20 countries, each responsible for risk strategy at their multibillion-dollar global organization.

Of those surveyed, 95 percent indicated that their organization has a specific budget for reputational events. The WTW survey found that only 10 percent engaged monthly with stakeholders on reputation issues, which is down from 37 percent in 2021.

Only 14 percent of respondents said their organization links a formal governance process for reputation risks to board-level key performance indicators, down from 23 percent in 2021. The survey also found that confidence in resilience to reputational issues has fallen, with only 13 percent of respondents reporting that their organization's reputational resilience was very good, which is down from 23 percent in 2021.

In a statement, WTW said that the findings represent a downgrading of reputation risk management capabilities, though noting that as reputation risk is increasingly viewed through a finance and environmental, social, and governance (ESG) lens, risk readiness assessments are likely to be more rigorous and consequently less optimistic.

"Reputation management is changing with the world. The companies leading the reputation-risk maturity curve are those that think regularly and hard about the potential strategic and financial impacts of incidents and do so in the context of the evolving influence of ESG and social media," Hugo Wegbrans, WTW's global head of broking, said in the statement. "Companies should hold regular, formal, board-level discussions about reputational risks, and proactively assess not just the threats, but also the reputational opportunities that may come with a crisis. It's quite possible to suffer a reputation event and come out of it looking even more favorable to customers."

Mr. Wegbrans noted that as ESG concerns grow alongside the explosion of social media, companies have become more rigorous in their reputation risk assessments and begun to see reputation as a financial risk, not just a public relations issue.

"At the same time, though, they're nervous of potential backlash events on social media, which may mean missed opportunities," he said.