Reputational damage

For the concept in diplomacy, see Reputational damage (diplomacy).
Categories of
Financial risk
Credit risk
Market risk
Liquidity risk
Investment risk
Business risk
Profit risk
Non-financial risk

Reputational damage is the loss to financial capital, social capital and/or market share resulting from damage to a firm's reputation. This is often measured in lost revenue, increased operating, capital or regulatory costs, or destruction of shareholder value.[1] Ethics violations, safety issues, security issues, a lack of sustainability, poor quality, and lack of or unethical innovation can all cause reputational damage if they become known.[2]

Reputational damage can result from an adverse or potentially criminal event, regardless of whether the company is directly responsible for said event, (as was the case of the Chicago Tylenol murders in 1982).[3] Extreme cases may lead to large financial losses[4] or bankruptcy, as per the case of Arthur Andersen.[5]

Reputation is recorded as an intangible asset in a company's financial records.[6] Hence, damage to a firm's reputation has financial repercussions.[7] Minor issues can be amplified by external social processes which lead to even more severe impacts on a firm's position.[8]

  1. ^ Heery, Edmund; Noon, Mike (2017). "A Dictionary of Human Resource Management". Oxford Reference. doi:10.1093/acref/9780191827822.001.0001.
  2. ^ Walter, Ingo (2011-12-13), "Reputational Risk", Finance Ethics, John Wiley & Sons, Inc., pp. 103–123, doi:10.1002/9781118266298.ch6, ISBN 9781118266298
  3. ^ Hindson, Alex; Louisot, Jean-Paul (2009), Klewes, Joachim; Wreschniok, Robert (eds.), "Managing reputational risk – Case studies", Reputation Capital, Berlin, Heidelberg: Springer Berlin Heidelberg, pp. 143–160, doi:10.1007/978-3-642-01630-1_10, ISBN 978-3-642-01629-5, retrieved 2021-04-05
  4. ^ "Reputation and Its Risks". Harvard Business Review. 2007-02-01. ISSN 0017-8012. Retrieved 2021-04-05.
  5. ^ Brown, Ken; DuganStaff, Ianthe Jeanne (2002). "Arthur Andersen's Fall From Grace Is a Sad Tale of Greed and Miscues". Wall Street Journal. Retrieved 2019-04-22.
  6. ^ AASB 138 (2018). "Intangible assets" (PDF). Retrieved 2019-05-10.{{cite web}}: CS1 maint: numeric names: authors list (link)
  7. ^ Fitzsimmons, Anthony; Atkins, Derek (2017). Rethinking reputational risk : How to manage the risks that can ruin your business, your reputation and you. Kogan Page, Limited. p. 45. ISBN 9780749477363.
  8. ^ Power, Michael (18 February 2017). "The risk management of everything" (PDF). The Journal of Risk Finance. 5 (3): 58–65. doi:10.1108/eb023001.