In the session, Reputational Risk - Is it Overstated?, Tassilo Amtage, senior regulatory advisor for corporate clients at Commerzbank, suggested that obligatory in-house risk training can paint a picture of overwhelming risks, and of reputational damage as disastrous. However, it is difficult to find a bank that hasn’t had its name dragged through the mud, and the key to managing reputation risk is in “the notion of balance”.
Reputational risk should be managed in the same way as any other risk, Amtage said, with firms finding a balance between making employees properly risk-aware, without “killing off their risk appetite entirely”.
Jonathan Frieder, compliance technology lead at Accenture, added that this should come from a framework of good governance, with risk appetite, policies and procedures in place at a board level.
It is important to be able to measure, monitor and analyse the brand of a firm, and to have a way to define reputational risk from internal and external sources, he said.
Within financial services, firms should use traditional tools to provide a foundation of their risk profiles, supplementing this with newer tools and technologies such as artificial intelligence, which can further analyse results and combine them with social media feeds and sentiment analysis.
Finally, Frieder said, firms should provide ongoing education and training on reputational risk, and have a plan in place to respond to “an event that becomes a crisis”.
Another panellist, Marisol Collazo, managing director for the Depository Trust & Clearing Corporation’s solutions business development team, said that when companies encounter crises that have a significant effect on their share price, it takes an average of 80 weeks for their share prices to recover.
The ability to be able to react quickly to such reputational damage, with the right accountability structure in place, is “a key differentiator”, she said.
Frieder added that, in the financial sphere especially, there is already an expectation of bad behaviour. By the time a damaging story hits the mainstream, he said, it will spread quickly, and response time is critical.
The key to managing this is “having a prompt and definitive message prepared”, he said.
In financial services, reputational risk should be treated with the same rigour and formality as other types of risk, and, “really, it’s an organisation-wide responsibility”.
The industry is currently suffering from a “lack of holistic reputational risk management”, he said, and while pulling in metrics and analysing data will tell part of the story, having an environment of personal awareness and responsibility within a firm will create a more “meaningful” risk profile.