Governance as the Starting Point for a Reputational Risk-Management Process

Carsten Steinhoff and Rainer Sprengel

WHY REPUTATIONAL RISK NEEDS GOVERNANCE

The reputation of a company is clearly one of the main factors for its success. It needs hard work and a long time to build up a sound reputation in the market. Unfortunately, it can be destroyed immeditely by one single event. Examples of tragedy and misfortune can be found in the press on nearly every business and every day. With the increase in new communication technologies such as Twitter, Facebook and mobile computing, the environment has become more dynamic and dramas evolve much faster than ever before. To limit the damage, many of those cases need a highly flexible crisis intervention in case of a critical event.

Behavioural aspects and the impact of single people’s actions have continuously increased. An example of how unexpected a reputational effect can be is Josef Ackermann, the former CEO of Deutsche Bank, who made a two-fingered V-for-victory gesture on his first court appearance for the Mannesmann trial. That truly was a disaster for Deutsche Bank’s market perception. This example shows how different the causes of reputational damage can be and that, in future, risk awareness will probably be the most important factor for