Pentland Analytics with Aon examines dynamic between
reputation risk and shareholder value in the age of technology, social media
SINGAPORE - Media OutReach - August 17, 2018 - Reputation
events, such as cyber attacks, have a direct impact on share price, according
to the findings of a new report released today by Pentland
Analytics with Aon plc, a leading global professional services firm providing a
broad range of risk, retirement and health solutions.
Reputation Risk in the Cyber Age study looked at 125 reputation events during
the last decade, measuring the impact on shareholder value over the course of
the following year. The report found that since the introduction of social media, the impact of reputation events
on stock prices has doubled. In
the wake of a crisis, the size of a company and the strength of its reputation
did little to protect against the loss of value.
management awareness and tools have evolved, reputation risk continues to weigh
on corporate executives as one of their leading concerns. For the past 10
years, reputation risk has occupied one of the top spots on Aon's bi-annual Global
Risk Management Survey," said Randy Nornes, enterprise client
leader, Aon. "Savvy companies that develop and use a robust risk management
framework can not only better navigate reputation events but can often see a
net gain in value post-event."
At times of
crisis, investors often use information about a company shared on social media
to re-assess their expectations of future cash flow, which can positively or negatively
impact a company's share price. Report findings showed that companies could add
20 percent of value or lose up to 30 percent of value depending on their
reputation risk preparedness and management behavior in the immediate aftermath
of a crisis.
The study identified
key drivers of successful recovery from a reputation event, including:
communications must be instant and global
of honesty and transparency are essential
social responsibility is critical
technologies continue to emerge, such as robotics, artificial intelligence and
bionics, all requiring constant vigilance," added Dr. Deborah Pretty, founding
director of Pentland Analytics. "Technological developments have heightened
reputation risk by making it easier, cheaper and faster for people to spread
research into the impact of crises on shareholder value was first conducted by
Pretty in 1993 and again in 2000, before social media was an active influencer.
The reports focused, respectively, on the contrasting abilities of firms to recover from crises as well
as reputation impact in the absence of
physical loss. In the 2018 version of the study, special attention was given to
both the growth in social media and the value impact of cyber attacks.
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About Pentland Analytics
Analytics provides advanced analytics and advisory services to the executive
management of the world's leading companies. The firm converts complex business
issues into analytics solutions that yield clear insights and direction. The results
inform strategic decisions and help to build clients' resilience, reputation and