When it comes to reputational and ESG risk readiness, there is considerable lack of confidence on the part of global executives in their own organisations’ approach, said WTW recently when releasing results of a survey.
According to WTW, it surveyed 500 global executives from 250 top firms across 20 countries in retail, manufacturing, leisure and hospitality, transportation, NGOs, and charities, including senior executives who are based Australia, China, Hong Kong, Indonesia, and Singapore and responsible for risk strategy across their organisations.
- 83% say they take reputational risk seriously and place it in the top five risks across their company.
- 77% of senior executives are not fully confident in their companies' reputational and ESG risk readiness.
- Positive strides are being made but more can be done — only a moderate amount of assessment has gone into analysing the risk or putting in place a formal process to ensure governance, accountability, monitoring and reporting.
- Despite formal teams being in place, around 75% of companies do not hold their board members accountable for reputational and ESG risks – creating a negative perception amongst staff of a lack of commitment.
- 70% of senior executives focus more on the risk of reputational damage caused by an internal event (such ascustomer /employee abuse or ESG) and less so on an external event (such as cyber crime) — what looks like an oversight on an important external risk could be the result of a board that is not perceived to take the matter seriously.
- 74% of senior executives are aware of the potential cost of damages caused by a reputational event, and as a result 86% have reserved budget to cover the costs and 84% have a contingency budget for marketing and communications.
- However, these costs might not be completely accurate given 87% do not forecast frequency and severity of potential damages exposing a significant risk of misallocated budget.
Most organisations appear to view reputational crisis as a short-lived media event while few appear to have the level of modelling that would enable them to quantify the scale of financial losses, said Simon Weaver, Head of Corporate Risk & Broking, Asia and Australasia, and Head of Australasia.
“This means they may not be prepared for the full impact on their business if a damaging reputational event occurred, which is why it is critical to look at reputational crisis insurance to mitigate potential reputational risk,” he advised. “It takes decades to build corporate reputation but takes minutes to ruin it.”