OpRisk Asia: reputation is a different breed of risk, panel says


Trying to measure and model reputational risk in the same way as other risks would be a serious mistake, delegates at the OpRisk Asia conference in Singapore heard today.

Participants in a panel discussion this afternoon warned that setting up a separate reputational risk management team would be a mistake. "Everyone is responsible for reputational risk. It's a second-order risk that arises from mismanagement of other risks, and it can occur in any part of the organisation. You don't need a separate reputational risk management silo," said Patricia Jalleh, the head of risk strategy at United Overseas Bank.

"I don't think you can model reputational risk," said Michelle Mott, head of risk management and change at Westpac. Anthony Rizzo, risk executive in the global markets division of Commonwealth Bank of Australia, added: "There are some case studies of reputational events that could help you start to build a model, but I think we have a long time to go before we get to that."

Similarly, banks shouldn't regard reputational risk as simply another risk class to hold capital against, the panel said. "Regulators don't mandate reputational risk capital because they know we already take account of it where we can," Mott said. Potential threats could be ranked in seriousness, but it was a mistake to think that a dollar value could be assigned to potential reputational risk exposures, Jalleh added.

Instead, banks should focus on preparing a reputational risk framework ahead of time. "When a bank is relying on capital to cushion a shock, it's already too late," Jalleh said. "To manage it, you have to identify who are the key stakeholders – all of whom could have different views and expectations."

"There's definitely value in having a framework," Mott agreed. "Once the event has occurred, it's too late – you're already in crisis mode and the reputational damage has already been done."

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