What are the causes of reputational risk?

Today’s businesses face increased scrutiny from the public, media, regulators and activists.

Social media’s influence is a major factor, particularly among younger people, who increasingly rely on it for news and opinions.

It can amplify any event that causes negative publicity. For example, a product failure or a damaging tweet can travel around the world in minutes. A crisis can appear to come from nowhere, spread like wildfire and be hard to control.

In this fast-moving landscape, reputation crisis management can be challenging. Many organizations don’t have a complete picture of their reputational risks or the impact they could have on future profit.

But the risk can be managed through insurance and risk mitigation strategies.

Can reputation be insured?

Businesses have traditionally found reputational risks difficult to insure as their unpredictability made them hard to assess and quantify.

Our insurance solution focuses specifically on risks most likely to affect any business exposed to public opinion, especially those in leisure and hospitality, retail, transportation, charities and non-governmental organization (NGOs), and manufacturing.

The reputational risk triggers include:

Abuse and discrimination

Videos or reports of employees discriminating against or abusing customers or other employees or cruelty to animals can go viral in minutes leading to reputational harm.

Actual or threatened injury or harm

Incidents such as physical injury, disease outbreaks, abduction, active assailant attacks and products that cause harm can have an immediate impact on confidence and reputation.

Damage by association

Your reputation can also be tarnished by the celebrities or other businesses affiliated with you if they commit a crime or act unethically.

We can also discuss other perils for inclusion as insured events on a bespoke basis.

Example scenarios

Airline attracts public criticism

The situation

A global airline attracted public criticism after its crew stopped a customer boarding a flight. The customer, was wrongly thought by staff to have pushed one of their colleagues. Other passengers filmed staff refusing to board the woman. They posted the videos to social media saying they were shocked at her treatment by the airline.

The videos went viral, leading some people to say they would boycott the airline. Customers began to book with other airlines as the social media backlash grew.

How we could help

Our reputational crisis insurance covers reputational damage caused by the mistreatment or abuse of a customer by an employee. This includes loss of gross profit suffered as a result, as well as the cost of crisis communications and brand rehabilitation.

Safety incident at tourist attraction

The situation

A high-profile tourist attraction hosted a carnival. A ride malfunctioned resulting in dramatic images and videos on social media. Some people suffered minor injuries, but social posts led to rumors and speculation that people were severely harmed or even died. The bad publicity resulted in the early closure of the carnival and reduced ticket sales for the tourist attraction.

In this scenario, the attraction’s public liability and property policies would cover third-party costs but not the cost of the reputational damage to the business.

How we could help

We could help the attraction recover. Our reputational crisis insurance solution includes a bodily injury trigger, so the business would be covered for loss of gross profit as a result of the reputational damage associated with the accident, as well as the cost of crisis communications and brand rehabilitation.

All names, characters, and incidents portrayed in the case studies are fictitious. No identification with actual persons (living or deceased), places, buildings, companies, entities or products is intended or should be inferred.

Talk to us

Talk to our reputational risk specialist about how reputational risk insurance, crisis consultancy and risk intelligence can help you identify, manage and protect against emerging threats.