August 28, 2018 11:30
Photo : Stockvault.net
The events affecting the reputation, such as cyber attacks, have a direct impact on the share price of a company. The impact of these events on shareholder value has doubled since the arrival of digital technology, according to a new report published by Pentland Analytics and Aon.
The study, which focuses on the risk of damage to the reputation to the era of cybernetics has studied 125 crises of reputation that have occurred during the last ten years in measuring the impact on shareholder value during the next year.
Aon reminds us that no protection can actually protect against the loss of value following a crisis, but that good preparation can make a difference. “Smart companies that develop and use a robust framework of risk management can not only better manage the events affecting the reputation, but they can also see a net gain in value after the event,” explains the head of corporate clients at Aon, Randy Nornes.
Social networks, in part, responsible
In times of crisis, investors often use information on a business shared on social networks in order to reassess their expectations of future cash flows. This can have a positive impact as a negative on the share price of a company, says Aon.
“New technologies continue to emerge, such as robotics, artificial intelligence and bionics, all requiring a constant vigilance. The technological developments have increased the risk of harm to the reputation by making dissemination of information easier, less expensive and faster, ” says Dr. Deborah Pretty, a founding director of Pentland Analytics.
Risk well now
The report has demonstrated that businesses can add 20 % on their value, or lose up to 30 % in function of their degree of preparedness to the risks of damage to the reputation and behaviour of management immediately after a crisis.
“Although the awareness and tools of risk management have evolved, the risk of damage to the reputation continues to weigh on business leaders, thereby becoming one of their main concerns,” says Mr Nornes.