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The Behavioral Economics of Reputation Risk

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Executives now attribute 63% of their firm’s market capitalization to reputation. Reputation risk threatens that value through the economically-relevant changes in the behaviors of aggrieved and emotionally charged stakeholders. It is a perennial top C-suite and boardroom concern according to serial surveys, corporate regulatory disclosures, the governance, risk and compliance literature, CEO and director turnover notices, and D&O litigation filings. Strategies for mitigating the risk, according to nearly 40 years of qualitative marketing literature, are pre-crisis virtue signaling through acts of corporate social responsibility, controlled marketing tone, and professionally managed crisis communications.

Critics have rightfully observed that marketing alone is not a substitute for risk management. In this program, we’ll define the characteristic qualititative features of the risk and then dive into quantitative models to better understand what actions governance, risk, and finance professionals can take to forestall, mitigate and otherwise manage the risk and its consequences.

For years there’s been talk about the many compelling reasons for firms to implement an overarching governance and enterprise reputation risk management strategy. Attendees will leave this program understanding that there are compelling reasons why such strategies that call upon the skills and resources of governance, risk and finance professionals need to be at the forefront, with marketing initiatives developed in coordination with the governance effort.
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