2018 Most Dangerous Emerging Risks

Social Media Acts as Reputation’s Existential Threat

Social media — the very tool used to connect people in an instant — can threaten a business’s reputation just as quickly.
By: | April 9, 2018 • 8 min read

Weinstein. Spacey. O’Reilly. Lauer.

We don’t need to consult Google to know who these men are or what they’ve allegedly done. Now stitched into the very fabric of our society, the entertainment industry “elite” accused of sexual misconduct are part of the mantra of a movement to end harassment and call out others who violate trust. Their reputations are ruined.


But reputation exists outside the person; the Weinstein Company, for example, filed for bankruptcy four months after the story broke that the man in charge allegedly sexually harassed or assaulted more than 80 women during his career.

“Threats to reputation always involve anger or disappointment from stakeholders triggered by a failure to live up to expectations,” said Nir Kossovsky, CEO, Steel City Re.

Stakeholders, he said, expect companies to have systems in place that act as deterrents for bad behavior, like sexual harassment in Weinstein’s case.

The value of reputation-related claims is on the rise, too.

“Because of #MeToo and the gymnastics scandals, there is a concern that employment claim values could go up,” said Larry Reback, managing principal and leader, policy response unit, Integro Insurance Brokers, referencing the former USA Gymnastics doctor Larry Nassar, who has been convicted of serial child molestation.

Reputation risk isn’t new. But the way a business’s reputation is threatened has entered a new realm of uncertainty because of how fast information can travel. The #MeToo movement is just one example of how hundreds of thousands of people can band together globally. It acts as a reminder of just how fast a reputation can fall: reputation is now an existential risk.

The Speed of Social Media

Companies big and small can be ruined with a tweet, a like or a share.

“Reputation risk is, in part, a function of culture-linked expectations. Social media is a channel in which culture is spread. New expectations can be global in minutes. In a way, the internet has been weaponized,” said Kossovsky.

Nir Kossovsky, co-founder and chief executive officer, Steel City Re

“Look at the headlines,” said Natalie Douglass, senior managing director, management liability practice, Gallagher, in regard to #MeToo.

“The Weinstein Company tried to sell its assets to avoid bankruptcy. A year ago, it was the most successful entertainment company in the world. Social media is playing the largest role. It moves fast and reaches more people in an instant.”

But with the way #MeToo has swept the country by storm, are businesses approaching reputation coverages differently?

“It’s too early to tell,” said Douglass. She added that the movement does hold the possibility to change how reputation cover is handled over time, but that would need to be monitored moving forward.

“There’s a notion that reputation risk spread through social media can descend like a tornado; one does not prepare for the tornado as it’s descending.” — Nir Kossovsky, CEO, Steel City Re

What #MeToo did do, however, was show just how fast a reputation can be put at risk. What may start off as a disgruntled post on social media can turn into hundreds of thousands of voices ringing out against someone and their business.

“#MeToo isn’t necessarily a watershed moment,” said Kossovsky. “But it forced the leadership of companies to appreciate the speed at which reputation can be threatened.”

Reputational risk has always been there, said Sandy Crystal, executive vice president, Crystal & Company, whether it be a cyber event or a product recall or #MeToo.

“In the age of social media, things happen more quickly. Social media exacerbates reputational risk,” he added.

In the last few years alone, a number of companies faced the wrath of social sharing:

After a doctor was dragged off a United Airlines flight at Chicago O’Hare International Airport, one bystander’s video of the incident surpassed four million views on YouTube. It led a number of Twitter users to spread the hashtag #BoycottUnited. Within days, the hashtag had more than 3.5 million impressions.


The modern-age taxi service Uber faced a bevy of crises in February 2017, from allegations of workplace sexual harassment to a leaked video of the company’s CEO berating an Uber driver. A survey showed that some 57 percent of rideshare users held the company in a negative light following the allegations. That same survey also showed 56 percent of users between September 2016 and March 2017 stopped using Uber because of the negative news associated with it.

Another big name affected by the speed of the internet? Wells Fargo. One scandal on top of another, from opening unauthorized credit card accounts to failing to issue refunds on policies where people paid auto loans off early, the bank is still working to rebuild its reputation.

#MeToo and these similar events placed reputation in the spotlight with a whole new force. It’s become a risk that moves so fast, it’s hard to be certain where it’s headed next.

Difficult to Cover

As an existential risk, underwriters find reputation difficult to price because of the wildly different outcomes that could arise. Defining how to put value to a company’s brand is equally as challenging. Many are hesitant to even write the risk at all.

Larry Reback, managing principal and leader, policy response unit, Integro Insurance Brokers

“Underwriters need to model losses to underwrite a risk,” said Reback. He used Chipotle as an example. After numerous health-related outbreaks, including norovirus, salmonella and E. coli, the food chain suffered significant financial losses and a drop in its consumer base.

“How do you measure an organization’s reputation? Each company is different, but the consequences of a reputational event can be catastrophic. It would also likely require the participation of the worldwide insurance market for meaningful risk transfer and, right now, there aren’t a lot of markets willing to provide protection for financial loss.”

“Only a handful of insurers have been willing to cover reputation as a stand-alone policy,” said Douglass. “I don’t see that changing.”

Though some insurance products — from cyber to D&O to liability — include aspects of reputation to fill in the gaps, the lack of stand-alone policies poses an interesting challenge for risk managers to implement practices to prevent damage from spreading.

With social media, reported Forbes, it’s actually worse for a business to ignore a negative post online.

Even a simple response acknowledging a customer’s complaint is better than leaving it unanswered. A RightNow Customer Experience Impact Report found that 89 percent of consumers begin doing business with a competitor following a poor customer experience.

The same report found that half of the people surveyed only give businesses about a week to respond before they stop doing business with them. And once the social media storm begins, the stakeholders hold the power. What tends to bring a company to a grinding halt is how its stakeholders perceive a blow to reputation.

“Is it a rogue employee in a well-governed business who stepped out of line? Or is it deeper than that? Is the behavior of the person a symptom of something more systemic?” asked Kossovsky.

Waiting until a sexual harassment claim is filed or a misguided employee acts up won’t cut it; risk managers have to prepare for the worst before the worst can happen. When an issue is deeply rooted in the culture of the company, fast action to expel the behavior and the person or people behind the behavior is quickly taken.

Take Volkswagen for example. After the Environmental Protection Agency found that VW diesel engines were rigged to pass carbon dioxide emissions tests when they were not street legal, the company’s chief executive resigned within a week of the scandal coming to light.

VW also endured a company-wide internal inquiry and suffered a quarterly loss of more than $3 billion.

“This is an opportunity for risk managers to show their value to an organization. They can get involved with the board and the C-suite.” — Larry Reback, managing principal and leader, policy response unit, Integro Insurance Brokers

“The topic [of reputation] is getting a lot of attention from the C-suite and board levels,” said Reback. Despite reputation not typically being an insured risk, those in higher positions are not taking reputation risk lightly.

“The board and CEOs recognize that business reputation risk can become personal reputation risk,” said Kossovsky.

Stakeholders expect quick action to expel those in charge of a company blunder. In Weinstein’s case, a zero-tolerance policy was just one tactic used to soothe its stakeholders. But it was too little too late due to the magnitude of the allegations and how deep the behavior went.

“This is an opportunity for risk managers to show their value to an organization. They can get involved with the board and the C-suite,” said Reback.

Mitigating Reputation Risk

“A lot of the conversation surrounding reputation happens narrowly, product by product,” said Crystal. “The conversation needs to be broader.”

With the growing force that is social media, companies are cognizant of how easily their brands can fall. There are some key ways businesses mitigate reputation risk today, like company-wide training or investing in liability or D&O coverage to fill in the gaps, but this risk requires a proactive approach. Not reactive.


“There’s a notion that reputation risk spread through social media can descend like a tornado,” Kossovsky said. “One does not prepare for the tornado as it’s descending; they have to build defenses to prepare for it from the get-go.”

“#MeToo is a wake-up call to employers and risk managers. While, unfortunately, the underlying conduct is not new, it is an opportunity to review corporate culture and training,” said Reback.

“Some organizations use a captive to help fund some of these losses,” he added. “But it’s still a growing exposure.”

The best outcomes come when risk managers are aligned with human resources, IT and other departments, said Douglass.

She added: “Reputation needs to be a part of the culture of a company. From top-down, there needs to be a focus on protecting the brand.” &

Autumn Heisler is the digital producer and a staff writer at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

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The Profession

For This Pharmaceutical Risk Director, Managing Risk Means Being Part of the Mission to Save Lives

Meet Eric Dobkin, director, insurance and risk management, for Merck & Co. Inc.
By: | September 28, 2018 • 5 min read

R&I: What was your first job?
My first job out of undergrad was as an actuarial trainee at Chubb.I was a math major in school, and I think the options for a math major coming out are either a teacher or an actuary, right? Anyway, I was really happy when the opportunity at Chubb presented itself. Fantastic company. I learned a lot there.

R&I: How did you come to work in risk management?
After I went back to get my MBA, I decided I wanted to work in corporate finance. When I was interviewing, one of the opportunities was with Merck. I really liked their mission, and things worked out. Given my background, they thought a good starting job would be in Merck’s risk management group. I started there, rotated through other areas within Merck finance but ultimately came back to the Insurance & Risk Management group. I guess I’m just one of those people who enjoy this type of work.


R&I: What is risk management doing right?
I think the community is doing a good job of promoting education, sharing ideas and advancing knowledge. Opportunities like this help make us all better business partners. We can take these ideas and translate them into actionable solutions to help our companies.

R&I: What could the risk management community be doing a better job of?
I think we have made good advancements in articulating the value proposition of investing in risk management, but much more can be done. Sometimes there is such a focus on delivering immediate value, such as cost savings, that risk management does not get appropriate attention (until something happens). We need to develop better tools that can reinforce that risk management is value-creating and good for operational efficiency, customers and shareholders.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?
I’d actually say there hasn’t been as much change as I would have hoped. I think the industry speaks about innovation more often than it does it. To be fair, at Merck we do have key partners that are innovators, but some in the industry are less enthusiastic to consider new approaches. I think there is a real need to find new and relevant solutions for large, complex risks.

R&I: What emerging commercial risk most concerns you?
Cyber risk. While it’s not emerging anymore, it’s evolving, dynamic and deserves the attention it gets. Merck was an early adopter of risk transfer solutions for cyber risk, and we continue to see insurance as an important component of the overall cyber risk management framework. From my perspective, this risk, more than any other, demands continuous forward-thinking to ensure we evolve solutions.

R&I: What’s the biggest challenge you’ve faced in your career?
Sticking with the cyber theme, I’d say navigating through a cyber incident is right up there. In June 2017, Merck experienced a network cyber attack that led to a disruption of its worldwide operations, including manufacturing, research and sales. It was a very challenging environment. And managing the insurance claim that resulted has been extremely complex. But at the same time, I have learned a tremendous amount in terms of how to think about the risk, enterprise resiliency and how to manage through a cyber incident.

R&I: What advice might you give to students or other aspiring risk managers?
Have strong intellectual curiosity. Always be willing to listen and learn. Ask “why?” We deal with a lot of ambiguity in our business, and the more you seek to understand, the better you will be able to apply those learnings toward developing solutions that meet the evolving risk landscape and needs of the business.


R&I: What role does technology play in your company’s approach to risk management?
We’re continuing to look for ways to apply technology. For example, being able to extract and leverage data that resides in our systems to evaluate risk, drive efficiencies and make things like property-value reporting easier. We’re also looking to utilize data visualization tools to help gain insights into our risks.

R&I: What are your goals for the next five to 10 years of your career?
I think, at this time, I would like to continue to learn and grow in the type of work I do and broaden my scope of responsibilities. There are many opportunities to deliver value. I want to continue to focus on becoming a stronger business partner and help enable growth.

R&I: What is your favorite book or movie?
I’d say right now Star Wars is top on my list. It has been magical re-watching and re-living the series I watched as a kid through the eyes of my children.

R&I: What is the riskiest activity you ever engaged in? When I was about 15, I went to a New York Rangers versus Philadelphia Flyers game at the Philadelphia Spectrum. I wore my Rangers jersey. I would not do that again.

Eric Dobkin, director, insurance & risk management, Merck & Co. Inc

R&I: What is it about this work you find most fulfilling or rewarding?
I am passionate about Merck’s mission of saving and improving lives. “Inventing for Life” is Merck’s tagline. It’s funny, but most people don’t associate “inventing” with medicine. But Merck has been inventing medicines and vaccines for many of the world’s most challenging diseases for a long time. It’s amazing to think the products we make can help people fight terrible diseases like cancer. Whatever little bit I can do to help advance that mission is very fulfilling and rewarding.

R&I: What do your friends and family think you do?
Ha! My kids think I make medicine. I guess they think that because I work for Merck. I suppose if even in a small way I can contribute to Merck’s mission of saving and improving lives, I am good with that. &

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]