Reputational risk is the most challenging category of risk to manage, according to 92 percent of companies responding to survey from property and casualty insurance company ACE Group.
The survey, conducted across 15 countries within the EMEA region, the survey found that while 81 percent of companies in the survey see reputation as their most significant asset, most of them admit that they struggle to protect it and identifies a number of key reasons why companies in the region often find reputational risk challenging to manage.
Among the findings:
• 77 percent of companies find it difficult to quantify the financial impact of reputational risk on their business, making it harder to measure than traditional, more tangible risks.
• 68 percent of companies believe information and advice about how to manage reputational risk is hard to find, compounding the sense of uncertainty and confusion about how best to manage it.
• 66 percent of companies feel inadequately covered for reputational risk from an insurance perspective.
• 56 percent of companies say social media has greatly exacerbated the potential for reputational risk to affect their business.
The report also suggests that companies need a clear framework for managing reputational risk that reduces the potential for crises, taking a multi-disciplinary approach that involves the CEO, PR specialists and other business leaders to build the broader perspective that is necessary for identifying and managing less obvious reputational risks.
In addition, companies should work harder at measuring how their reputation is perceived. Understanding perceptions of key stakeholders, their interplay and their impact on corporate reputation, is essential for tracking and managing reputational risk effectively.
And finally, companies should sharpen up their crisis management plans to keep pace with today's faster-moving world.
“Our research suggests that many companies may be over-confident in their abilities to respond to a crisis,” says ACE European Group president Andrew Kendrick. “Regular review and testing—including the incorporation of social media scenarios—will allow a faster response when disaster strikes.
"Insurance is not a panacea for the fast-evolving world of reputational risk. Nevertheless, I believe there is much that insurers and brokers can do collectively to help their clients. This includes the evolution of new more holistic insurance solutions that involve the input of crisis and PR specialists.”