Organisations are increasingly aware of the potential cost of reputational damage, but as awareness increases, confidence in their risk management systems and crisis response capabilities has fallen since 2021, according to a report by WTW.

The reputational risk readiness survey polled 375 senior executives from global businesses across 20 countries, each responsible for risk strategy. Companies span the retail, manufacturing, leisure, transportation, and NGO sectors. The study found that environment, social, and governance risks are three of respondents’ top five reputational concerns. Reputation is now a top-three risk for 26% of companies, up from 18% in 2021, and a top five risk for 55%.

Among the other findings, 95% of respondents said they have a specific budget for reputational events, while just 10% engaged monthly with stakeholders on reputation issues, down from 37% in 2021. Only 14% link a formal governance process for reputation risks to board-level KPIs, down from 23% in 2021. Overall confidence is low – only 13% said their resilience to reputational issues is very good, down from 23% in 2021.

Driven by the need to provide business partners, customers, regulators, investors, and lenders with their ESG credentials, WTW says that reputation has become a financial risk, changing attitudes towards reputation management. In response, finance departments now take a greater role, with three-in-five companies surveyed stating that their senior financial controller is a member of their crisis event team – an increase of almost 50% from 2021.

Hugo Wegbrans, WTW’s global head of broking, said: “Reputation management is changing with the world. The companies leading the reputation-risk maturity curve are those that think regularly and hard about the potential strategic and financial impacts of incidents and do so in the context of the evolving influence of ESG and social media. Companies should hold regular, formal, board-level discussions about reputational risks, and proactively assess not just the threats, but also the reputational opportunities that may come with a crisis. It’s quite possible to suffer a reputation event and come out of it looking even more favourable to customers.”

The survey results appears to show that businesses are backsliding on reputational risk but, said Wegbrans, the reality is more nuanced: “As ESG concerns widen, especially in light of the explosion of social media, companies have begun to assess reputational risk more rigorously. That’s made them see reputation as a financial risk, not just a PR concern, and led them to increase budgets to deal with reputation crisis events.

“At the same time, though, they’re nervous of potential backlash events on social media, which may mean missed opportunities. It’s time for a new approach, and our survey shows that companies realise that.”

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