MOST DANGEROUS EMERGING RISKS
Reputation’s Existential Threat
Social media — the
very tool used to
connect people in an
instant — can threaten
a business’s reputation
just as quickly.
By Autumn Heisler
Career arc and shareholder damage can occur at lightning speed from pervasive reputational risk.
Weinstein. Spacey. O’Reilly. Lauer. We don’t need to consult Google to know who these men are or what they’ve allegedly done. Now stitched into the very fabric of our society, the entertainment industry “elite” accused of sexual misconduct are part of the mantra of a movement to end
harassment and call out others who violate trust. Their reputations are ruined.
But reputation exists outside the person; the Weinstein Company, for example,
filed for bankruptcy four months after the story broke that the man in charge
allegedly sexually harassed or assaulted more than 80 women during his career.
“Threats to reputation always involve anger or disappointment from
stakeholders triggered by a failure to live up to expectations,” said Nir Kossovsky,
CEO, Steel City Re.
Stakeholders, he said, expect companies to have systems in place that act as
deterrents for bad behavior, like sexual harassment in Weinstein’s case.
The value of reputation-related claims is on the rise, too.
“Because of #Me Too and the gymnastics scandals, there is a concern that
employment claim values could go up,” said Larry Reback, managing principal
and leader, policy response unit, Integro Insurance Brokers, referencing the
former USA Gymnastics doctor Larry Nassar, who has been convicted of serial
Reputation risk isn’t new. But the way a business’s reputation is threatened has
entered a new realm of uncertainty because of how fast information can travel.
The #Me Too movement is just one example of how hundreds of thousands
of people can band together globally. It acts as a reminder of just how fast a
reputation can fall: reputation is now an existential risk.
THE SPEED OF SOCIAL MEDIA
Companies big and small can be ruined with a tweet, a like or a share.
“Reputation risk is, in part, a function of culture-linked expectations. Social
media is a channel in which culture is spread. New expectations can be global in
minutes. In a way, the internet has been weaponized,” said Kossovsky.
“Look at the headlines,” said Natalie Douglass, senior managing director,
management liability practice, Gallagher, in regard to #Me Too.
“The Weinstein Company tried to sell its assets to avoid bankruptcy. A year
ago, it was the most successful entertainment company in the world. Social media
is playing the largest role. It moves fast and reaches more people in an instant.”
But with the way #Me Too has swept the country by storm, are businesses
approaching reputation coverages differently?
“It’s too early to tell,” said Douglass. She added that the movement does hold
the possibility to change how reputation cover is handled over time, but that
would need to be monitored moving forward.
What #Me Too did do, however, was show just how fast a reputation can be
put at risk. What may start off as a disgruntled post on social media can turn into
hundreds of thousands of voices ringing out against someone and their business.
“#Me Too isn’t necessarily a watershed moment,” said Kossovsky. “But it forced
the leadership of companies to appreciate the speed at which reputation can be
Reputational risk has always been there, said Sandy Crystal, executive vice
president, Crystal & Company, whether it be a cyber event or a product recall or
“In the age of social media, things happen more quickly. Social media
exacerbates reputational risk,” he added.
In the last few years alone, a number of companies faced the wrath of social
After a doctor was dragged off a United Airlines flight at Chicago O’Hare
International Airport, one bystander’s video of the incident surpassed four
million views on You Tube. It led a number of Twitter users to spread the hashtag
#BoycottUnited. Within days, the hashtag had more than 3. 5 million impressions.
The modern-age taxi service Uber faced a bevy of crises in February 2017,
“This is an opportunity for
risk managers to show their
value to an organization.
They can get involved with
the board and the C-suite.”
—Larry Reback, managing principal and leader,
policy response unit, Integro Insurance Brokers