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Airmic to work with Reputation Institute

Airmic has announced it will be joining forces with the Reputation Institute to tackle the complex subject of reputational risk. The collaboration follows from a lively and thought-provoking round table hosted by Airmic about the difficulties associated with the peril.

The two organisations will explore ways in which risk managers and the insurance industry can improve their handling of reputation. They aim to develop a framework setting out an agreed definition of reputational risk and an understanding of its drivers and what can be done to mitigate and insure against it.

Surveys of Airmic members have repeatedly shown reputation to be at or near the top of the concerns of risk managers.

“Reputation can be a company’s most important asset,” John Hurrell, Airmic chief executive, said. “Yet it is an extremely complex subject and very difficult to underwrite. Whilst recognising its importance, risk managers and underwriters struggle to get to grips with it. We want to build a greater understanding of all aspects of reputational risk and to explore the possible solutions both from an insurance and wider risk management perspective.

“I am delighted to announce that we will be working with the Reputation Institute and benefiting from their extensive experience.”

Despite being one of the biggest concerns for risk managers, reputation is one of the hardest to manage or to mitigate through insurance due to both its intangible nature and the potential magnitude of losses.

Spencer Fox, managing director UK at the Reputation Institute and a participant in the round table, said: “Reputation is the defining area of risk management. Risk managers and underwriters are experts at quantifying financial, operational and regulatory risk, but reputation risk management requires a different set of tools and techniques. Companies with the strongest reputations will not only recover faster from adverse developments, but also often outperform their rivals.

He added: “We are therefore very encouraged that Airmic will be making reputational risk a priority and we look forward to working with them.”

The reputation risk round table took place in July with a panel representing risk managers, insurers and reputation experts. The debate ranged from how to define and measure the risk, to whether and how insurers can offer greater cover in an area where there are currently very few underwriters.

The panel agreed that the risk management community and the firms that employ them have a lot to learn. There was also consensus on the need for the different parties – especially clients, brokers, underwriters and experts in the field of reputation – to work together.

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