Managing reputation damage requires good crisis managementReprints
As companies and organizations ponder risk transfer solutions to indemnify lost revenue and profit stemming from reputational and brand damage, experts say effective crisis management remains an essential part of mitigating such risks.
Insurance that covers the loss of revenue and profit attributed to a change in consumer perception of an organization's brand because of a crisis is an element of reputational risk coverage, said Randy Nornes, executive vp with Aon Risk Solutions in Chicago.
“The reality is if you've damaged a brand and someone paid you for the financial loss, you still have a damaged brand and there's not enough insurance in the world to make you whole again because your business is basically damaged now,” Mr. Nornes said.
Many insurers offer reputational risk policies that include services from crisis management and public relations firms at a prenegotiated rate to assist the company or organization in the event of a crisis.
“Insurance is a poor substitute for having a current crisis communication plan, having a scenario tested and having insurance cover the costs of reaching out and communicating with your stakeholders,” said Rob Yellen, chief underwriting officer of executive liability for Chartis Inc. in New York. “Time after time, we've seen those fundamental elements make a difference when managing brand and reputation risk.”
Proper crisis communication can mitigate the overall financial impact of an adverse event, said Simon Barker, a senior reputational risk and crisis management consultant with Marsh Risk Consulting in San Francisco.
“It's not just the underlying event that matters; it's the response to that event that is typically the variable that needs to be controlled and has the biggest impact,” he said.