Insuring reputation relies on understanding a company’s network

Insuring a company’s reputation requires re/insurers to understand that company’s network of customers, suppliers, partners, peers and investors, according to risk management software and services company Russell Group.

Its new white paper, Can Reputation Be Insured?, notes that 25 percent of a company’s market value is directly attributable to its reputation according to the World Economic Forum.

“Likewise, 25 percent of a company’s intangible value is ‘reputation capital’, which is defined as a total sum of a company’s relationship with its stakeholders according to the Reputation Institute. A good brand and reputation are the golden ticket to a large IPO valuation in today’s economy,” it states.

It says armed with an understanding of its network (its customers, partners, suppliers, peers and investors), a company and its re/insurers can grasp not just who the company is connected to - thereby removing any harmful business connections - but also how the network contributes to the success of a company and the network in which it operates.

Big players in that network may be able to improve the reputation of that industry network by improving their own reputation. “Given that reputation helps to build value, boards must therefore move to protect and build reputation across their networks, which suggests more effective sector-wide collaboration,” the paper states.

“Consequently, it is imperative that this reputation is valued and determined as a function of a company’s own reputation and that of its network. Once the components of a company’s reputation are understood, risk mitigation strategies, including insurance purchase, can be employed to help protect this reputation and the risk within the balance sheet of damage to reputation.”

Speaking at the launch of the new white paper, Suki Basi, Russell Group CEO said: "Having this understanding of a company’s network is vital to tackling the issue of reputation insurance. This will allow a re/insurer or corporate to understand not just who the company is connected to directly but also how dependent the company is on the network and the network on the company.

"Given that reputation helps to build value, boards must therefore move to protect and build reputation across their networks, which suggests more effective sector-wide collaboration and information sharing."

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