Managing Risk: Reputation events twice as costly for companies since rise of social media

August 17, 2018 - 01:48
Managing Risk: Reputation events twice as costly for companies since rise of social media

Pentland Analytics with Aon examines dynamic betweenreputation risk and shareholder value in the age of technology, social media


SINGAPORE - Media OutReach - August 17, 2018 - Reputationevents, such as cyber attacks, have a direct impact on share price, accordingto the findings of a new report released today by PentlandAnalytics with Aon plc, a leading global professional services firm providing abroad range of risk, retirement and health solutions.


The 2018Reputation Risk in the Cyber Age study looked at 125 reputation events duringthe last decade, measuring the impact on shareholder value over the course ofthe following year. The report found that since the introduction of social media, the impact of reputation eventson stock prices has doubled. Inthe wake of a crisis, the size of a company and the strength of its reputationdid little to protect against the loss of value.


"Although riskmanagement awareness and tools have evolved, reputation risk continues to weighon corporate executives as one of their leading concerns. For the past 10years, reputation risk has occupied one of the top spots on Aon's bi-annual GlobalRisk Management Survey," said Randy Nornes, enterprise clientleader, Aon. "Savvy companies that develop and use a robust risk managementframework can not only better navigate reputation events but can often see anet gain in value post-event."


At times ofcrisis, investors often use information about a company shared on social mediato re-assess their expectations of future cash flow, which can positively or negativelyimpact a company's share price. Report findings showed that companies could add20 percent of value or lose up to 30 percent of value depending on theirreputation risk preparedness and management behavior in the immediate aftermathof a crisis.


The study identifiedkey drivers of successful recovery from a reputation event, including:

1.    Crisiscommunications must be instant and global 

2.    Perceptionsof honesty and transparency are essential

3.    Active,social responsibility is critical


"Newtechnologies continue to emerge, such as robotics, artificial intelligence andbionics, all requiring constant vigilance," added Dr. Deborah Pretty, foundingdirector of Pentland Analytics. "Technological developments have heightenedreputation risk by making it easier, cheaper and faster for people to spreadnews."


The coreresearch into the impact of crises on shareholder value was first conducted byPretty 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 wellas reputation impact in the absence ofphysical loss. In the 2018 version of the study, special attention was given toboth the growth in social media and the value impact of cyber attacks.


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About Aon
Aon plc (NYSE:AON) Aon is aleading global professional services firm providing a broad range of risk,retirement and health solutions. Our 50,000 colleagues in 120 countriesempower results for clients by using proprietary data and analytics to deliverinsights that reduce volatility and improve performance. Aon has five specific global solutionlines: Commercial Risk Solutions, Reinsurance Solutions, Retirement Solutions,Health Solutions and Data & Analytic Services.


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About Pentland Analytics

PentlandAnalytics provides advanced analytics and advisory services to the executivemanagement of the world's leading companies. The firm converts complex businessissues into analytics solutions that yield clear insights and direction. The resultsinform strategic decisions and help to build clients' resilience, reputation andshareholder value.