Reputation Risk

Reputation risk is, simply, the risk of damage to a firm’s reputation. A firm’s reputation is a valuable but volatile asset. The more valuable a firm’s reputation, the more reputation risk the firm faces. A good reputation can enable a firm to obtain the support and resources of its various stakeholders more easily and on more favorable terms than its rivals. A good reputation can also help a firm gain the benefit of the doubt from its stakeholders and thereby avoid or recover from controversies more easily. But the goodwill and favor that accrue to a good reputation can be damaged or destroyed easily. Thus, firms seek to manage the risk of harm to their reputations. This entry covers reputation as a valuable but volatile ...