In today’s world, reputation is more than an intangible – it’s a real business asset. If it’s damaged, the financial impact can be deep, affecting sales, stock prices and company valuations.
Reputation risk is now among the top 10 in most risk registers. [1] But many businesses find it hard to quantify and therefore, difficult to protect against.
This can leave you exposed not just to losses, but also fiduciary risk, as investors and regulators increasingly expect directors to anticipate and prevent foreseeable events.
Innovative reputation risk model with granular insights
Our Reputation Risk Quantification Model marks a step change in this process. It allows you to model the frequency and severity of likely sources of reputational threats through ground up, granular modeling.
Drawing on rich datasets from our risk intelligence partner Polecat, the model uses detailed risk analytics to calculate the impact on sales and profits across a range of negative event scenarios.
This can put real numbers behind reputation risk and enable more informed decisions and proactive risk management, grounded in data.
Our new Reputational Risk Quantification Model predicts the financial impact of reputation damage, helping businesses make data‑driven decisions to safeguard brand value and manage risk with confidence.
Quantifying the risk of celebrity endorsement
The initial release of the model quantifies potential losses from the disgrace of a celebrity endorser. Relationships with celebrities and influencers are increasingly central to marketing strategies, from retail to manufacturing.
The right association with a recognized figure in sports or entertainment can boost your sales and profile.
Research has shown that endorsements can increase revenue by an average 4% [2]. But these gains can be thrown into reverse if the celebrity’s conduct reflects badly on the brand.
Being able to accurately assess the risks involved can help you:
- Get a clearer picture of the nature and size of the risks
- Make better decisions about agreements with celebrities and influencers
- Fulfil your fiduciary duties to investors and stakeholders
- Mitigate and manage the impact of misconduct on your reputation and finances
- Understand how best to protect your business
As the model and data develops, we will evolve it to include other reputational perils.
Case study
Quantifying the risks of a global star’s disgrace
The scenario
A star with a global following endorses a major consumer goods brand. The association brings an immediate sales boost and potential for future growth through co-branding projects. Over time the celebrity becomes more outspoken and erratic, but the company continues the relationship as profits grow. Finally, the star’s comments cross a line, causing serious offence, sparking a backlash and leading to falls in revenue and stock prices. Investors bring a class action alleging breach of fiduciary duty by the board for failing to prevent these impacts.
How the Reputation Risk Quantification Model would help
Combining real-time intelligence and sophisticated analytics, our model could quantify the risks at every stage, helping the company prevent reputational perils, minimize the financial impact and provide evidence of fiduciary due diligence
Pre-agreement: Before entering the deal, the company could have used the model to compare the star to hundreds of other potential celebrity partners, assessing and benchmarking their reputation risks to enable better, more informed decisions.
During the relationship: The model would turn real-time monitoring of conversations about the celebrity, across thousands of media touchpoints, into quantified risk trends. When the star began to be more vocal, the trend would have been immediately flagged, enabling early intervention to prevent reputational damage. Where a company has multiple endorsers and influencers, the model can identify who poses the greatest risk, so efforts can be focused on managing them.
As reputation risk increases: As the noise around the celebrity grew, the model could have quantified the financial losses and costs if they were disgraced, helping the company plan for a potential crisis. This knowledge could also help the company decide whether to retain or transfer the risk and compare risk transfer options.
Defending claims: By modeling and quantifying risks throughout the association, the company would have been able to report on risks to the board and evidence their due diligence in case of legal claims.
Please note this is a fictional case study created solely to illustrate how the Reputational Risk Quantification Model would work in practice.
Get in touch
Take the first step towards protecting your business from the financial impact of reputation damage.
Get in touch to find out how our innovative Reputation Risk Quantification Model can help you get ahead of potential risks and make data-driven decisions to safeguard your brand’s value.
