“If boards don’t give risk professionals the authority and resources they need to build an expansive reputation risk management process, the vast majority of those board members will suffer personally if their firms are called to account in the courts of law and public opinion."
PITTSBURGH (PRWEB) October 21, 2020
Corporate board members are more personally exposed than ever to legal liability in connection with reputational risk, and risk management professionals need to engage them in mitigating those risks, says Nir Kossovsky, CEO of Steel City Re.
“Every time a company overpromises and overpromotes itself,” says Kossovsky, “it is exposing itself and its board members to legal and reputational risk. Risk professionals need to be able to make a compelling case to their boards that the world of reputational risk has changed and a new approach is necessary. We are frequently asked for advice on this point and are now making our insight publicly available.”
Steel City Re’s advice on what Board members need to know is available in a brief video. It includes:
- Federal lawsuits claiming reputation damage are up 60% this year. 72% of board members say this kind of litigation hurts them personally.
- Plaintiffs are arguing that reputation is mission critical and that companies are inflating their reputations and their stock prices by overpromising and overpromoting. And courts are allowing these claims to go forward.
- Promoting ESG initiatives and signing onto pledges like the one created by the Business Roundtable, raise stakeholder expectations. If companies don’t meet them and face losses, they and their boards are going to be sued.
- Boards need to oversee the reputation risk management process, making sure their companies can meet the expectations they’ve set, document their activities, validate their oversight through third parties and insurance, and communicate the value they’re providing.
“If boards don’t give risk professionals the authority and resources they need to build an expansive reputation risk management process, the vast majority of those board members will suffer personally if their firms are called to account in the courts of law and public opinion,” observed Kossovsky.
Steel City Re employs principles of informational and behavioral economics to provide reputation risk management and insurance solutions. It pioneered the field of parametric reputation insurances using synthetic measures of reputational value. Steel City Re is an overseas advisor to the Lloyd’s of London syndicate, Tokio Marine Kiln.