Reputational risks

Reputational risks are those that have a detrimental impact on a company’s reputation or lead to negative perceptions by customers, shareholders, partners, investors and other internal and external stakeholders.

Reputational risks are closely linked to liability and operational risks, and have the effect of reducing public trust in a company.

The reputational risks associated with a company’s operations in conflict affected areas may include:

• negative public and media attention
• loss of investor trust resulting in falling share prices
• the cessation of business relationships
• increased regulatory costs
• increased stakeholder and media scrutiny of subsequent business activities
• being the target of NGO or shareholder activism

Pushing the humanitarian agenda through engagement with business actors: the ICRC’s experience¹

“In places where business operations are affected by significant security risks and are thus accompanied by deployment of armed forces or law enforcement agencies, companies need these public entities to perform well. Good performance means in particular that these entities are able on the one hand to securitise companies’ staff, assets, and operations, and on the other to carry out their tasks in a way that does not encroach on communities’ rights and well-being and that does not exacerbate tensions or provoke security incidents with these communities. Experience has indeed shown repeatedly that when communities are negatively affected by the security deployment associated with a company’s operations, the company is also negatively affected, either because the operations have to be stopped or suspended due to the tensions or because the company’s reputation takes a significant dent locally or internationally.”

¹ Claude Voillat, ‘Pushing the humanitarian agenda through engagement with business actors: the ICRC’s experience’ (2012) 94(887) International Review of the Red Cross 1089, 1103.