A recent study suggests there is an 80% chance that a company will lose at least 20% of its equity value in a single month due to reputational damage.*
- Customers are able to rapidly communicate their bad experiences through the internet and social media outlets, such as Facebook and Twitter.
- A poor service review or an adverse experience with a product has the ability to reach thousands, known as going viral.
- Insurance companies are beginning to include crisis management, expense reimbursement, and other potential PR reimbursements that can be added into certain policies.
- Since coverage is fairly new it’s important that coverage forms are thoroughly analyzed.
What can a business do to prevent and respond?
- Identify and assess areas where a threat to reputation can occur. Products liability is one area of concern, as well as, poor customer service experiences. Another area might be disgruntled and unhappy employees.
- Implement a Reputational Risk Management plan. An effective plan will encompass prevention measures and contemplate effective responses during crisis.
- Monitor the effectiveness of the plan and update it for changes within the organization. The plan must at a minimum equip the company to communicate the corrective action taken, but also not exacerbate a situation and create additional liabilities.
The result, it’s a balancing act and many companies are not prepared to effectively deal with reputational risk. That’s why it’s important to have a risk management professional that can help implement a plan toward prevention and response. At Rue, our Risk Management professionals can help your company get in front of this very real business threat.
*Source: BusinessInsurance.com, October 7, 2012. Study Prepared by Oxford Metrica and sponsored by Aon P.L.C.