Reputational Risk a Growing Threat to Organizations' Value

A new report from Lloyd's suggests that a massive amount of corporate value is exposed to reputational risks, with any major adverse event affecting an organization potentially causing reputational damage.

The report, "Safeguarding reputation—Are you prepared to protect your reputation?," developed in collaboration with KPMG, notes that corporate brand and reputation accounts for 25.3 percent of the market capitalization of the world's leading equity market indices, $16.77 trillion of shareholder value in the first quarter of 2019.

Whether an event causes reputational damage depends on an organization's response to the report, the Lloyd's report suggests.

The report notes that the risk of adverse reputational events has increased as organizations continue to digitize their operations and customer engagement. The impacts of the COVID-19 pandemic have further heightened the risks.

To remain resilient as reputational risks increase, organizations need to be aware of the importance of protecting their reputation and make those efforts part of their risk management strategy.

Insurance plays a significant role in the reputational risk management effort, the Lloyd's report said, with products supporting such losses as legal costs and loss of market share. Going forward, risk indemnity will increasingly be supported by additional services that will help organizations assess reputational risks, build resilience, and provide support after a crisis.

"Insurers have an opportunity to become true end-to-end reputational risk management partners, moving well beyond traditional risk indemnity and the usual crisis management support," the report said.