Regulatory and reputational risk converging: Lloyd’s

Regulatory risk may be converging with reputation risk, with new regulatory penalties requiring a company to effectively advertise its own conviction through the sanction of a publicity order, a Lloyd’s specialist said.
Anthony Fitzsimmons, chairman of London-based reputation risk specialists Reputability, said that regulators are more reputation-savvy and the United Kingdom is at an early stage in the “re-evolution” of penalties involving reputation.
“The debates [in the UK] on introducing a new penalty of reputational damage for corporate manslaughter show that judge-inflicted reputational damage is thought by politicians to be a more effective way of hurting an organization than fines,” he told Lloyd’s.
The U.K.’s Corporate Manslaughter and Corporate Homicide Act, which came into effect last year, requires a company found guilty of corporate killing to effectively advertise its own conviction through the sanction of a publicity order.
Typically, underwriters associate reputation risk with “sudden and accidental” events, but Fitzsimmons cautions that an organization’s reputation can erode away gradually too.
“Many causes of reputational damage are not the result of classic insurable events, but the result of the organization’s strategy, values, culture and behaviour,” he said.
“Many will be taboo because they emanate from above the risk manager; and others will sit in blind spots because the organization doesn’t how to ask the right questions.”