What was previously barely a concern has moved to the forefront, with nearly 80 per cent of leaders in financial services attributing their heightened awareness of reputational risk to the Hayne commission.
“Our survey results clearly show a growing intensity of concern about workplace reputational issues, which reflects what we’re hearing from many of our clients,” said Jason Noakes, Norton Rose Fulbright head of employment and labour in Australia.
“Major organisations are becoming both more sensitive to reputational risk and more willing to identify its key drivers. These concerns are likely to persist into 2020. We also agree with respondents’ top prediction that ‘the importance of ethics and conduct in the workplace’ is most likely to have the greatest impact on organisational reputation in the coming years.”
The way that institutions perceive the damage of reputational risk has also changed.
In 2017, institutions were primarily concerned about short-term impacts – the immediate costs and consequences of a scandal, and the distraction to business functions tasked with handling a crisis. The third concern was the impact on brand equity.
But in 2019, 45 per cent of respondents named the long-term impact on brand equity as the most damaging aspect of reputational risk, while only 17 per cent of respondents were concerned about the distraction to the business functions tasked with handling the crisis.
Only 7 per cent of organisations outsourced risk management in 2019.
The survey also showed that financial institutions are becoming increasingly aware of non-financial risks to their institutions. When asked to identify specific risks that might impact an organisation’s reputation, 62 per cent of total respondents chose cyber risks, including data breaches. That was closely followed by corporate governance, chosen by 48 per cent of respondents.
“The risk focus of financial services entities is quite expected as they continue to seek to proactively identify and address financial risks with regulators following the Hayne royal commission,” said Scott Atkins, Norton Rose Fulbright head of risk advisory in Australia.
“But the greater significance of the survey results is their reflection of the rapidly evolving non-financial risks that now face companies and their directors across multiple industries and sectors.”
“We have seen these risks manifest especially in climate, cyber security, privacy and employment settings throughout 2019, and these risks in turn have sparked the interest of litigation funders, a trend that is likely to expand the class action risk (along with continued enforcement action from regulators) for entities into 2020 and beyond.”
