Companies are recognising the dangers of reputational risk
Source: Middle East Insurance Review | Mar 2024
Environmental pollution, discrimination or human rights violations can result in serious reputational damage and companies are becoming increasingly aware of this risk according to the latest edition of WTW’s Reputational Risk Readiness survey.
The study reveals that companies are increasingly recognising the danger of reputational risks and the potential costs of image damage – not least due to the increasing relevance of ESG obligations.
At the same time, however, trust in one’s own risk management systems has fallen since 2021 and there is a lack of adequate precautionary and insurance measures in many places. For the study, WTW surveyed 375 managers and risk managers from 20 countries.
For 26% of participants, reputational risks are among the top three risks; in the first survey in 2021, this only applied to 18%. More than half (55%) rank it among the top five risks (2021: 65%).
As demands to meet ESG obligations grow, organisations are also recognising the financial risk of reputational damage. Finance departments are therefore taking on a larger role in reputation management. Three out of five respondents said that their financial controlling department is now represented in the crisis team. This corresponds to an increase of almost 50% compared to 2021. Furthermore, 95% have a special budget for reputation measures.
Despite high awareness of reputational damage and its costs, companies have dwindling confidence in their risk management. Only 13% (2021: 23%) said their resilience to reputational risks is very good.
On the positive side, however, organisations are still trying to prepare for the worst-case scenario, more than 90% conduct annual exercises to test their crisis management team and 95% have ready-made press templates for most crisis scenarios. M