Can you insure reputation?
It can take 20 years to build a reputation, but just 5 minutes to ruin it. In today’s fast- paced world of social media, transparency and accountability, just one wrong move can impact both your bottom line and your reputation within minutes. Here, we look at the kind of policies that cover reputational risk and how they can help to protect you.
A definition of reputational risk insurance is ‘the measure of your exposure to a specific set of risks that could impact your ability to operate as normal, should an event trigger a material impact on your reputation’.
Typically, the risks to your business reputation could include financial irregularities or misconduct; environmental concerns, data and security breaches, including cyberattacks; legal investigations, regulatory breaches, professional malpractice; executive misconduct; ethical violations and challenges; and associations with external third parties that bring your brand into disrepute.
The power of social media
We live in a fast-moving world where every action and word is scrutinised on social media or by shareholders, and regulatory requirements are continually changing. Every decision you make could potentially expose your business to an increased level of scrutiny – and this in turn, could damage your position in the market, affect customer relations and, ultimately, impact your bottom line.
With transparency and accountability top of the list regarding reputation, social media and online chats can impact your brand’s reputation – negatively or positively – literally within minutes! If you were to lose client information in a cyberattack, undergo a regulatory investigation or experience an ESG failure, it could very quickly damage your business performance and brand value. Likewise, lawsuits or careless comments by company individuals regarding race, gender or sexual orientation can cause lasting damage.
Reputational management
You need to take reputational management very seriously and have robust risk management procedures in place to protect against such risks. This could take the form of staff training regarding cyber security; managing your culture to prevent normalisation of potentially harmful comments; monitoring social media to see how your company is being reported; and having a crisis management plan in place should the worst happen.
It may be a good idea to hold regular satisfaction surveys to find out what your clients and staff think about your firm. This could provide an effective early warning system. Above all, ensure one senior member of your team is responsible for crisis management, so that your efforts don’t become fragmented or fail to be augmented.
Reputational risk cover
Many insurance products cater for different aspects of reputational risk, including product recall and contamination, and death, disability and disgrace cover. Increasingly, products such as cyber liability and product recall contain reputational insurance options, although they tend to provide a crisis management service, rather than financial compensation.
A number of innovative products are becoming available, however, that can help to indemnify reputational harm. Specialist insurers are starting to provide reputational insurance, and demand is growing as more companies look to safeguard the value of their brand.
Typically, reputational covers a list of agreed ‘perils’, ranging from product quality issues to a problem with a celebrity endorser or from a data breach to contravention of an ethical issue, all which could affect the ability of the company to operate as it did before. If one of the agreed ‘perils’ occurs, resulting in a reduction in sales, the insurer will then indemnify for the loss in profit.
Talk to NLIG
Our business is your protection, and this includes protecting your reputation. An insurance solution providing reputational risk cover can provide the finance and resources you need to give your organisation the time it needs to recover – whether as part of your cyber insurance, professional indemnity or liability cover, or a stand-alone product. To find out more please contact us for details. Either call 01992 703 300 or email insurance@nlig.co.uk