Reputational risk is not addressed in the context of Pillar 1 of the Basel Capital Framework though it is a material risk for banks given the rise of social media and the resulting speed at which information including rumours can be disseminated to a much wider audience. Protest targeting senior managers, suppliers or shareholdersc. Companies large and small are exposed to fraud, and when it hits the news, it becomes a reputational risk. Risk Management, Courier 2: Integration of Risk into Strategy-Setting and Business Planning. Reputational risk is governed by the Reputational Risk Framework (the Framework), which was established to provide consistent standards for the identification, assessment, and management of reputational risk issues. This was brought home to me a few years ago when I was doing some work in the Philippines. Integrating risk with strategy-setting and business planning makes risk a factor at the decision-making table and facilitates the intersection of risk management with performance management. Continuity / Disaster Recovery, Employee The goal of reputation risk quantification is to support the overall reputation risk management framework of a company (see our previous publications: Reputation Risk on the In light of these increasing complexities, a streamlined risk framework can enable firms to … I have trawled through the internet, but found nothing which is fit for purpose. Let’s discuss your risk management plans. Investigations, Forensic Allegedly, Kroger failed to identify and manage the risk introduced by the maker of the additive in its risk management planning. Suppliers using underage workers or modern slavery, a. Product recall or allegations of product causing harmb. Yes, they did have a plan with an incident management team which could have managed the incident, but I felt in our planning we concentrated too much on incidents unlikely to happen, such as mass loss of staff and ignored more likely incidents, such as an oil spill. Addressing reputational risk is a challenging and worthwhile endeavor. Reputation is one of the most valuable and fragile assets that a bank can have, making bank reputation risk management an extremely important process for institutions. Nonetheless, the term “reputational risk ” is used in this discussion paper to simply describe the risk of damage to reputation. Regulator enforcement and close down of operationsc. Regulatory pressure to implement RepRisk management has increased recently. The understanding that reputation strategy is a long-term vision 2. Services, Intellectual For example, the board’s oversight of risk is important because effective identification and management of risk can identify major th… However, in the absence of agreement on how to define and measure reputational risk, it has been ignored. Others striking, effecting delivery of servicef. The governance of our reputational risk management is integrated into the Group’s broader risk governance framework. a. Support, Risk I have tried using an enterprise risk framework of hazard risk, financial risk, operational risk and strategic risk, but this seems too wide and goes into areas such as financial risk or business strategies, which I believe are beyond the remit of the business continuity manager. As part of the process, we might mitigate the risk, to lessen the impact if it occurred or the likelihood of it happening. Fraud Week 2020: Got Situational Awareness. Deutsche Bank’s Reputational Risk Framework Deutsche Bank introduced a revised Framework to manage reputational risk in 2015 which embodies the Bank’s 3 Lines of Defence principles. After all, reputation is the key to building public and consumer trust. We also need to consider black swans that have occurred elsewhere, but the organisation undertaking the risk assessment may have never heard of them. Legal case causing reputational damaged. Reputational risk is not considered in most risk-management frameworks to be a primary risk; rather, it is an outcome, or a consequential risk, that arises from other types of risk. Incident affecting the banking systemd. Cover upe. Regulators, industry groups, consultants, and individual companies have developed elaborate guidelines over the years for assessing and managing risks in a wide range of areas, from commodity prices to control systems to supply chains to political instability to natural disasters. In either case, organizations should be going beyond awareness of social media to actively monitoring and reporting of relevant Internet /social media activity at a managerial level. Business process being found to be causing major environmental damagec. Figure 3 from The Reputation Risk Handbook illustrates where reputation risk resides within the universe of risks – it is strategic, potentially cuts across, or can be related to, any other kind of core, standalone risk.. Types And Examples Of Reputation Risk. What I have come up with so far is using PESTLE as a framework, which involves putting a number of risks under each criterion and using this as a prompt to help those conducting the risk assessment to look at the widest variety of risk possible. Environmental bad practice by supplier of failure to dispose of correctly hazardous materials. Reputation risk is the threat to meeting expectations that in turn precipitates a crisis. Reputation risk management is inextricably linked to the company’s risk management and crisis management disciplines, as well as to the alignment of strategy and culture with the enterprise’s commitment to … Once they have been identified we can look at whether we need to develop a bespoke business continuity solution (strategy) and write this up into a contingency plan. Reputation Management For us, reputation is a fully-fledged strategic orientation tool for business support, subject to constant monitoring so as to improve … Events like these are precisely the types of risky outcomes that your systematic ERM strategy aims to identify, evaluate, and mitigate. We do not have space to provide an exhaustive list of reputational risks, but we can illustrate the point that preventing selected negative outcomes can help protect you… RR-1 Reputational Risk; RR-2 Sources of Reputational Risk ; RR-3 Reputational Risk Management. Institutions, Casinos & The owners of the yogurt company are seeking compensation from Kroger because their company’s reputation has been damaged by a product recall due to the mold. RR-3.1 Reputational Risk Management Framework. “It was great to have James McAlister as a trainer because of his knowledge and experience in the field of Crisis Management and BCM, through this he was able to provide practical (real life) examples to back up the theory.”, Business Continuity Training Ltd Explosion, accident or incident at site, a. Data breachc. On the 5th day of Christmas, BC Training gave to you... 50% off our VIA-C Worked Examples document. Lowers & Associates provides comprehensive enterprise risk management solutions to organizations operating in high-risk, highly-regulated environments and organizations that value risk mitigation. Corporate and risk governance is the framework in which all risks are managed at a bank as well as the oversight of the framework. #1: Effective board oversight: Reputation risk management starts at the top. What I have been considering for a while, is a framework for looking at risks beyond PPRS, which are perhaps more likely to occur. 5. Claims Investigations, Fraud The Group Chief Risk Officer (Group CRO) is the risk steward for reputational risk. Security- Strong infrastructure to defend against physical and cybersecurity threats helps avoid security breaches that could damage a company’s reputation. Property Risk Assessment, Financial 21 Fairhaven Road These risks are discussed more fully in the following paragraphs. Actively promoting sound environmental management and social responsibility programs helps create a reputation “safety net” that reduces risk. However, many company leaders say their organizations are not fully prepared to handle the reputational impact of a crisis. Therefore, damage control processes should be anticipated and organized in advance. On a positive level, organizations have an opportunity to build brand equity using social media effectively. Sustained or severe criticism in the media (or on social media)b. Criticism of the organisation by politician or celebrity c. Rumours or malicious falsehoods, a. We do not have space to provide an exhaustive list of reputational risks, but we can illustrate the point that preventing selected negative outcomes can help protect your reputation, not to mention your bottom line. Protest against the organisationb. Lancashire Get our latest posts delivered to your inbox: Vision and Investigations, Enterprise It goes beyond the list in the Good Practice Guidelines, but I am still not convinced it captures all the different types of risks that should be considered. Many of these factors are reflected in the asset we call “goodwill.”. Certification Program, IT Risk Hostile takeoverb. This is a human capital risk that can be mitigated with a well-designed screening program. The current framework shows that effective reputation management is a more dynamic and interactive effort than previously implied. This list is very generic and doesn’t take into account the risks specific to the industry. Although the impact of a loss of reputation can be immense, management and active steering of reputational risk is still in its infancy compared to other well-known risk types. This reputational risk exists for all employers. Risk governance is the process that ensures all company employees perform their duties in accordance with the risk management framework. Rather than just this reactive stance, an effective risk management program proactively helps to avoid these crises. Death or multiple injuries at one of our sites to staff, contractors or members of the publich. In both traditional and digital worlds, proactive planning and tactics will help you manage your reputational risks. These third parties hold your reputation in their hands. risks and their definitions. Background Screening, Special Health and safety breaches 6. 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. Accusations of bribesf. The board’s risk oversight lays an important foundation for managing reputation risk. This week Charlie applies the PESTLE framework to business continuity, in response to finding other risk management frameworks too restricting. No one should doubt that investors are alert to both the financial loss and the questions it raises about JPMorgan with respect to this case – was this truly a risk the company should have taken? Civil unrest or riotingg. Reputation risk: the current or prospective risk to earnings and capital arising from adverse perception of the image of the financial institution on the part of customers, counterparties, shareholders, investors or regulators. Strong board oversight on matters of strategy, policy, execution and transparent reporting is vital to effective corporate governance, a powerful contributor to sustaining reputation and the ultimate checkpoint on CEO performance. It also stresses the constraints placed on reputation management by recent organisational communications. Investigations, Litigation The long-term costs to companies are almost incalculable. The Board is responsible for the management of a business’ reputation and management is responsible for the systematic application of risk management systems and processes. Reputation Dashboards: Integrated, real-time or periodic online systems for tracking a company’s reputation internationally, both with media and with consumers 3. Management, Business Negative media coverage is often blamed on marketing, but the internet now extends exposure far beyond the reach of marketing activities. This will allow for a structured approach to managing reputational risk. We help our clients establish enterprise-wide culture risk and reputation risk management programs to gain greater insight into their organization’s culture, employee engagement, employee behaviors, and market signals. Lock out of datad. Consider the 135-page framework for enterprise ri… Managing reputational risk means managing customers, employees, stakeholders and the media. Part of being prepared for reputational risk may involve managing messaging proactively so that when negative events cannot be prevented, the organization has reputational capital that helps it ride out the storm. For example, BNP Paribas has a special committee under the Board of Directors called the Internal Control, Risk Management and Compliance Committee. No risk management plan can eliminate 100% of risk, and would probably be cost prohibitive if it tried. Reputation risk must be considered a material risk and strategic risk. Our framework. Failure to do so can easily lead to adverse legal action when an employee causes damage to another party. Stories like these are literally in the news everyday. risk management is a forgone conclusion, the heightened focus on risk management in recent years is a reflection of the increasingly complex operational and regulatory environment facing all firms. “James McAlister was great - really made the modules interesting and applied his experiences well to help us understand the subject matter.”. Signup to our weekly bulletin and get the latest articles straight to your inbox! Specie, View all posts by Lowers & Associates >, Understanding and Managing Violent Crime During COVID, Evaluating Security as the Value of Stored Assets Increases, Fraud Week 2020: Lessons Learned from Real Life Stories of Fraud. Events like these are precisely the types of risky outcomes that your systematic ERM strategy aims to identify, evaluate, and mitigate. Boards need to acquire the right sets of tools to measure, monitor and analyze it. Offer available 14th December only and ends at 00:00 GMT, Author: Charlie Maclean-Bristol, Training Director, FBCI, FEPS. I am still not sure about my list. Keywords: reputation management, Apple, iPhone 4, corporate reputation, organisational communications CBCI Certification Course (Good Practice Guidelines) course. More importantly, it equips participants with the knowledge to enhance current Enterprise Risk Management frameworks by integrating Reputational risk into the framework and business decision making This ensures reputation is protected into the future as well. Mission, Insurance The more I look at business continuity, the more I feel that basing the risk and threat assessment on PPRS (people, premises, resources and suppliers) or even on the new Good Practice Guideline’s list of buildings and work environment, IT, equipment, product/consumables and suppliers, is too narrow and does not give a holistic view of the risks business continuity planning should be addressing. In the news recently, the manufacturing arm of Kroger Company is being sued due to a failure of an additive the company purchased from a third party, which promoted mold growth in a yogurt product. Lytham St Annes If anyone has a better list or methodology I would be very interested in hearing from you and seeing if you have cracked this particular hard nut! In today’s transparent, connected world, protecting reputation and effectively managing risk are often important considerations for CMOs and other senior leaders. The primary risks associated with corporate and risk governance are strategic, reputation, compliance, and operational. Developing a Reputation Risk Management Framework 20 April 2018 Author: Charlie Maclean Bristol, Training Director, FBCI, FEPS This week Charlie applies the PESTLE framework to business continuity, in response to finding other risk management frameworks too restricting. Monitor opinions of employees, customers, vendors, shareholders, analysts and activists. A comprehensive Enterprise Risk Management (ERM) strategy can help protect your reputation by preventing events that damage it. Risk governance ... on the business’s reputation. Here are just a few ways you can continuously monitor brand reputation: What is Reputational Risk Management?
It is the current and prospective impact on earnings and capital arising from negative public opinion
It measures the change in perception of … management board of any organisation should therefore ensure that senior management establishes a risk management system for identifying, measuring, evaluating, monitoring, reporting, and controlling or mitigating reputational risk with foresight based on a sound methodological approach, which can be controlled and audited effectively. We have recommended doing background checks on vendors and business partners as part of the ERM process, and these would be focused on determining competence as well as formal legality. Reputation is an intangible asset. This event emphasised that I, as part of the analysis phase, had not identified this as a possible incident, as an environmental incident didn’t fit neatly within the PPRS framework. 1 Reputational risk may be a misnomer, as it may be … No. It is created when expectations are poorly managed and exceed capabilities, or when a company simply fails to execute. Reputational risk (or ‘reputation risk’) is one of the costs of events such as adverse actions for negligent hiring or publicized high-level fraud. A fuel tank had overturned and the fuel oil had spilled into the local creek. Reputation Scorecards: Validated measurement instruments against which to benchmark a company against key rivals 2. This module focuses mainly on – • elaborating on the HKMA’s approach to supervising reputation risk; With that said, developing a reputation strategy requires set competencies for success, namely: 1. As the cited article notes, it is the low probability but high impact event that can be most damaging. A great reputation can set a bank apart from its competitors. Being Forward-Thinking Helps to Link Strategy and Innovation With Risk Management Programs Environmental, a. Spillage or discharge off-site impacting on local community or members of the publicb. In a recent case, we read that the much admired company, JPMorgan, has agreed to pay or forego $410 million dollars in cash to terminate a charge that it manipulated California’s energy grid illegally (without admitting guilt). Enter DAY5 at the checkout to get hold of your copy! In his last bulletin of 2020, Charlie discusses how COVID-19 has impacted the future of business continuity. Summary: Key Tools for Reputation Management 1. That said,a crisis response program should be part of the plan. Reputation risk management is becoming a central aspect of developing reputation strategy. Gaming, Courier & ―Traditional Approach‖: CEO is in charge (84%) Reflects focus on crisis management only, reactive Reputation is focused only on organizations own operations. Adverse events will almost always either first emerge in social media or they will be magnified and re-broadcast in search and social media channels. Some observers argue that organizations should emphasize crisis management in ERM plans to manage reputational risk, e.g., in a ‘crisis response plan’. Social media have become the lightspeed amplifiers of reputational events, both good and bad. A sudden legal process, such as a dawn raid or emergency court application b. Over the last few weeks I have been thinking a lot about risk management frameworks for business continuity. the reputation risk losses more than doubling when an event happens to a firm with a strong brand. Risk Management, Cash Audit Cyber incident affecting operations or delivery of servicese. The final step in a reputational risk management program is to diligently track brand perception against your baseline. Management Training, Security The EBA paper on SREP (supervisory review and evaluation process; EBA/GL/2014/13) mentions reputational risk in the context of assessing operational risk and clearly classifies reput… Kidnap or blackmail, a. United Kingdom, Developing a Reputation Risk Management Framework, Charlie Maclean-Bristol, Training Director, FBCI, FEPS, The future of business continuity, post COVID-19. We were scheduled to conduct some incident management training as part of a business continuity roll-out at a plant, but when we turned up we found them in the middle of a major environmental incident. Scandal or corporate wrong doing (by employees or senior managers)d. Strike by employeese. Framework for Governance of ReputationalRisk Is reputation risk part of the overall risk policy? The ability to assess and predict what issues will hurt company reputation most Reputational risk(or ‘reputation risk’) is one of the costs of events such as adverse actions for negligent hiring or publicized high-level fraud. The guidance sets out a framework for breaking down the elements of an organisation that govern its reputation. 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