It’s been said that our reputations are like that of a great painting: once theauthenticity has been questioned, it is never looked at in quite the same way again. It is perhaps only the giants of business or public office who may survive damaging reviews. For everyone else, a reputation has the potential to make or break us. Insurance can cover a great many undesirable outcomes and thankfully harm against your reputation is one of them. Insurance can be sector-specific; what one business needs may be unnecessary for another. Damage to reputation however is a risk that is universally faced.
If you find yourself having to defend your reputation in court you’ll need to cover legal expenses alongside lost revenue, potential damage to shares and stocks and other related costs. Even if a claim is groundless, it can be a financially draining road to restoring your public image.
Consider the impact of the internet
Once, word of mouth could only travel so far. Bad press was never good but unless it was a high-profile case the public at large would never really know enough to react negatively. These days, the internet has given everyone with a connection a platform for their opinions and a potentially huge audience to pay attention to them. 84% of consumers place as much trust in an online review as in a personal recommendation, with 74% saying that positive reviews engender trust in a business. Those majority numbers are flipped to the negative side for your reputation if they perceive you as being less favorable than you’d like.
Five-star rankings for businesses and services loom larger than ever in building or deconstructing a reputation… and that’s merely how impactful public opinion can be. If someone feels they have a legitimate grievance with you, the modern era lends them the power to do serious and potentially lasting damage to your reputation. The importance of addressing negative reviews of your business can’t be overstated, but that’s not risk management; it’s damage control.
Defining and preventing reputational risk
It’s not as simple to pin down risk to reputation and therefore the need for reputation risk insurance (RRI) as it is for other insurable risks. The very nature of that ambiguity has ranked it low on the insurance list for many professionals. It can be a very wise move to protect yourself from that kind of uncertainty.
The Harvard Business Review lists three determinants for gauging reputational risk:
• Whether reputation exceeds true character or not
• The shifting of external expectations
• Quality of internal coordination
The Review highlights having a strong positive reputation with stakeholders, the dangers of not living up to a good reputation in reality and internal loss of drive toward positive public image as major factors in preventing (or generating) reputational risk.
Consider implementing RRI as part of an Enterprise Risk Management (ERM) program for you or your business. It’s a comprehensive projection of all the risks you may face both actual and figurative, and it lists your reputation as your most valuable asset along with proven ways to protect it before it requires being restored.
RRI is designed to limit the damage before it occurs
RRI is still a new field of insurance. As recently as 2015 it was being described as an emerging industry. The first comprehensive study of it was published that year and offered insight into the further damaging effects of negative reputational events.
When it comes to predicting what’s best to insure against to protect your reputation you can begin by looking at your current situation. Are you a business producing a potentially hazardous project? Are you a member of a profession providing medical or legal services? Knowing the potential pitfalls of your particular product or sector will inform you on the risks you face if you fail to perform in a manner the public expects.
If you’re part of a supply chain you should consider how many links are involved; could someone further along the line make a mistake that could backfire on you? Be aware of all potential liabilities in your reputation from your partners and associates and not only from yourself. When assessing yourself be honest about your weaknesses and strengths. If you decide that RRI is right for you, be sure to consult an insurance professional for an appraisal of your unique circumstances and what options will best protect your interests.
Avante Insurance is a South Florida family owned and operated insurance agency providing an array of insurance services to meet the individual needs of our customers. If you’re considering protecting against storm damage or any other outcome, you can call us at 305-648-7070, request an insurance quote or contact us with any questions or comments.