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Reputational risk, often called reputation risk, is a risk of loss resulting from damages to a firm's reputation, in lost revenue; increased operating, capital or regulatory costs; or destruction of shareholder value, consequent to an adverse or potentially criminal event even if the company is not found guilty. Adverse events typically associated with reputation risk include ethics, safety, security, sustainability, quality, and innovation. Reputational risk can be a matter of corporate trust.
This type of risk can be informational in nature that may be difficult to realize financially. Extreme cases may even lead to bankruptcy (as in the case of Arthur Andersen). Recent[when?] examples of companies include: Toyota, Goldman Sachs, Oracle Corporation, NatWest and BP.[further explanation needed] The reputational risk may not always be the company's fault as per the case of the Chicago Tylenol murders after seven people died in 1982.
In risk assessments, reputation risk is often considered as a risk event. However, it can be the end result of more specific risk events that can have a number of impacts.
- http://www.ffiec.gov/ffiecinfobase/booklets/retail/retail_03b.html Archived February 21, 2010, at the Wayback Machine
- http://www.time.com/time/magazine/article/0,9171,960693,00.html Archived December 21, 2008, at the Wayback Machine
- Tattam, David. "Reputation Risk: Risk Event or Risk Consequence?". Protecht Risk Management Insights. Retrieved 2017-05-01.