Confidence in reputational risk management falls in DACH

Companies are becoming increasingly aware of their reputational risks and the potential costs of image damage, not least due to ESG obligations, according to the Frankfurt-based DACH arm of WTW. The broker has told its German-speaking customers that at the same time, however, trust in risk management systems has fallen since 2021, and there is a lack of adequate precautionary and insurance measures in many areas. The analysis is based on the results of WTW’s Reputational Risk Readiness Survey, using interviews with 375 managers and risk managers from 20 countries. “ESG is a very broad field and is increasingly moving up the corporate agenda,” said Reiner Schwinger, head of central Europe at WTW. “Pollution, discrimination or human rights abuses can result in serious reputational damage, not only in the eyes of the public, but also of key investors or insurers who require compliance with ESG criteria. Companies must be aware of these far-reaching consequences and adequately protect themselves,” added the broker, in clear reference to the obligations that will come under the EU’s coming Corporate Sustainability and Due Diligence Directive (CSDDD). WTW reported that reputation is a top three risk for 26% of its survey participants. This has grown from 18% when the survey was first carried out in 2021. More than half (55%) now rank reputation damage among the top five risks. Environmental, social and governance are three of the top five reputational threats, based on the latest survey. Interestingly, only 15% rate cyber at a top five reputational risk. “While some companies give reputational risk a higher priority, others consider it to be less relevant. Nevertheless, the growing number of participants who rank image damage among the top three risks shows that reputation is considered one of the key risks from a company perspective,” said Olga Losing-Malota, head of broking for DACH at WTW. As demands to meet ESG obligations grow, organisations are also recognising the financial risk of reputational damage, said the broker. “Finance departments are therefore taking on a larger role in reputation management: three out of five respondents stated that their financial controlling department is now represented in the crisis team. This corresponds to an increase of almost 50% compared to 2021. Furthermore, 95% have a special budget for reputation measures,” it said. Despite the high awareness of reputational damage and its costs, companies have dwindling confidence in their risk management, found WTW. Only 13% believe that their resilience to reputational risks is very good. This is down from 23% in 2021. “This negative self-assessment is fatal, because the financial damage in particular can be life threatening,” said Losing-Malota. “Companies still have a lot of work to do. Only those who know their risk profile can take appropriate measures to minimise the threats.” The good news is that based on WTW’s research, organisations still try to prepare for the worst-case scenario. More than 90% conduct annual exercises to test their crisis management team and 95% have ready-made press templates for most crisis scenarios.

Confidence in reputational risk management falls in DACH

Reputational risk on the rise as ESG obligations mount

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