Reputation(al) Risk

Cathy Hampson, Gus Ortega

INTRODUCTION

A great debate rages about reputation or reputational risk. Throughout this chapter, it will be written as “reputation risk” with the “(al)” part not added, although to append it would still be correct. The reason is that people refer to it in both ways, and both are appropriate. The greater debate is whether it is truly a standalone risk or simply a consequence of other risks. We would argue it is a standalone risk and will explain in this chapter the reasoning.

Reputation risk can be defined and matched to a great degree with the reward it confers. It can be controlled in a similar way to other risks – not completely controlled, as it is often externally driven, but it holds, in common with other risks, the fact that it can be actively managed. In this chapter, we will define reputation risk; consider “good” and “bad” reputations; and look at the relationship with reputational expectations, reputational risk factors and how they impact on companies, and the ways of managing reputation risk and monitoring it.

Definition of “reputation(al) risk”

If we look at the definition of reputation as per a noted dictionary (Collins 2006) we find “reputation” defined as

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