[Skip to content]

Sign up for our daily newsletter
The Actuary The magazine of the Institute & Faculty of Actuaries

Reputation risks double in the age of social media

The impact of cyber attacks, product recalls and other ‘reputation events’ on share prices is two times higher today than it was before the introduction of social media.

Tech firms have large 'reputation premium' ©Shutterstock
Easier to spread news with social media ©Shutterstock

That is according to new research by Aon, which shows that companies now face losing up to 30% of their value in the immediate aftermath of a crisis if they do not respond well.

However, the findings also show that businesses can actually use social media to their advantage after a reputation event, increasing their value by as much as 20%.

Whether a recovery is successful or not was found to depend on instant and global crisis communications, perceptions of honesty and transparency, and active social responsibility.

“Although risk management awareness and tools have evolved, reputation risk continues to weigh on corporate executives as one of their leading concerns,” Aon enterprise client leader, Randy Nornes, said

“Savvy companies that develop and use a robust risk management framework can not only better navigate reputation events but can often see a net gain in value post-event.”

Citing data from Interbrand, Aon revealed how a ‘reputation premium’ accounts for more than half the value of the world’s top five companies, including Apple, Amazon and Google.

Technology firms represented just four of the top 10 most valuable companies back in 2000, but now account for seven.

As connected, smart devices become more prevalent, Aon said reputation risk management strategies must work across departments and understand increasing cyber threats.

“Technological developments have heightened reputation risk by making it easier, cheaper and faster for people to spread news,” said Dr Deborah Pretty, founding director at Pentland Analytics, which co-produced the research.

“New technologies continue to emerge, such as robotics, artificial intelligence and bionics, all requiring constant vigilance.”

Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession