Marketing Is Not Reputational Risk Management. You Need to Know the Difference

By: | April 16, 2020

Nir Kossovsky is the Chief Executive Officer of Steel City Re. He has been developing solutions for measuring, managing, monetizing, and transferring risks to intangible assets since 1997. He is also a published author, and can be reached at [email protected]

Companies need to think about the relationship between marketing and reputation in a new way. It’s the new reality of our post #MeToo, COVID-19, green-washing, social-washing, post-advertising world.


Reputation is not built on marketing. It is a product of stakeholders’ expectations — helpfully shaped by marketing — and a company’s ability to meet them. Reputation risk is the gap between those two.

Understanding those expectations, gathering intelligence from across the enterprise, and ensuring systems are in place so that those expectations are met is an enterprise-wide endeavor.

That means there is a role for each stakeholder-facing silo; e.g., marketing for customers, human resources for employees, sourcing for vendors, treasurers for the bond market and government relations for regulators.

Reputation risk can destroy years of stakeholder-built enterprise value in a heartbeat. That’s why coordination among the silos needs to be led by risk managers and general counsel — with oversight by the board and CEO.

Once it is clear that strong governance, leadership, controls and insurances are in place, then it should be the job of marketing, along with other externally facing departments, to communicate stakeholder-specific stories so that the entirety of the reputation risk management apparatus can be appreciated and valued.

Communication is strategic, artful and essential. As Dr. Strangelove explained: “The doomsday machine is terrifying … but the … whole point of the doomsday machine … is lost … if you keep it a secret! Why didn’t you tell the world, eh?”

Some Stats on Reputational Risk

This vital lesson is working its way around corporate water coolers — both real and virtual — where formerly siloed executives are better understanding the strategic enterprise-wide implications of reputation risks and their management.

Here are some statistics that illustrate my point about reputational risk.

  • 90% of the S&P 500 include reputational risk as a material peril in their public filings.
  • A survey found that leaders of top performing public companies believe reputation accounts for 76% of their firms’ value.
  • A recent study indicates that companies with strong reputational controls — that are managing reputational risk well — see less of a drop in stock price when a crisis hits and recover more quickly.
  • A new look at equity price performance during the COVID-19 crisis shows that, among similar companies in the same industry, those with the strongest reputational value metrics (as measured by a proprietary algorithm) are outperforming others.
  • A survey of global institutional investors found that, among nearly half, reputational risk ranked second after environmental, social and governance (ESG) in their consideration of investment decisions.

A study by Steel City Re recently found that the single most important thing a company can do to shore up its stock price in a reputational crisis is to buy back shares at key times. But now, federal legislation providing funding to support struggling companies through the COVID-19 crisis prohibits companies taking part from executing share buybacks.

Share buybacks tell shareholders a story of managerial confidence by combining the science of informational economics with the art of communications.

Taking away this simple tool — and with the political environment discouraging it among the corporate world generally — makes communications through the other available channels particularly important.

Companies Are Communicating in New Ways

Many companies are communicating well through these other channels. Companies like Alcoa, Pepsi, Omnicom, Uber and ISS are at the forefront, telling the world about their strategic risk management efforts through proxy statements, 10Ks, S-1s and employee newsletters.

Alcoa, for example, told investors that its CFO was bonused for having “… demonstrated leadership … which included strengthening the Company’s reputation among research analysts, rating agencies … results included improved corporate credit ratings.”

PepsiCo, among the first non-banks to disclose risk management practices in its 10K, spent a significant amount of disclosure space detailing its water and other environmental risks while sharing publicly at a gathering of enterprise risk managers how its ERM and marketing teams were collaborating to inform its stakeholders.

In an employee publication, the CEO of the world’s fifth largest employer, Denmark-based ISS A/S Group’s Jeff Gravenhorst, highlighted the importance of risk management and committed to position ISS as the industry leader in risk management and compliance.

“By building risk reliance for our customers, we ensure that they experience consistency, transparency and sustainability and that we retain our reputation as a safe, reliable partner in the markets where we operate.”

Some firms caution that reputation risk management is an existential concern. Uber warned its potential investors in its S1 filing that, “We have previously received significant media coverage and negative publicity … regarding our brand and reputation, and a failure to rehabilitate our brand and reputation will cause our business to suffer.”

This is not a new concept. Sound informational economic theories demonstrate the value of communicating about elevating and differentiating features that otherwise might not be apparent to stakeholders.

If a company wants to highlight the reputational resilience it has built to be able to influence decisions – equity selection, bond ratings, employment preferences, credit allocation, etc. — the story being told to stakeholders must be simple to understand, completely credible and convincing.

It also needs to be authentic. Aspirational marketing can trigger shareholder litigation in which the once-reliable absolute defense of “corporate puffery” may no longer provide blanket immunity. It’s a lesson Signet Jewelers Ltd. recently agreed to pay $240 million to learn.

No stakeholder should be left behind. That’s what the Business Roundtable decided last August in a statement that declared a range of stakeholders as being of equivalent value to company shareholders. This means companies need to tell a story that is clear and simple to understand about a diversity of issues including ethics, innovation, safety, security, sustainability and quality — think “ESG” plus.

Omnicom Group CEO Jonathan Nelson, for example believes uniting both “science and art” is a preferred creative form of expression in what he calls the “post-advertising era.”

Share buybacks aside, there are other scientific informational economic strategies that can be united with the full array of artful financial instruments. 

Since the dawn of the industrial revolution, insurances, warranties and other financial instruments have been used effectively to tell stories of risk management.


The insurances from Hartford Steam Boiler (today part of Munich Re) did more than indemnify. They told customers, employees, mortgage holders and others that buildings, ships and engines wouldn’t explode, mitigating fear.

During America’s Great Depression in the 1930s, Federal Deposit insurance (from FDIC) helped alleviate consumer trepidation over using the banking system to hold their assets. Today, companies are using ESG-linked loans to elevate and differentiate their ESG stories among stakeholders.

It is a new era for stakeholder communications. Now, all of the enterprise-wide risk management tools available must be used to protect the value of companies’ reputations.

Doing so and being able to tell a story of robust, authentic, enterprise risk management will elevate and differentiate companies, attract investment, customers and employees, and protect against losses in market cap and increases in the cost of capital should reputational crises emerge. &

More from Risk & Insurance

More from Risk & Insurance

Risk Scenario

The Betrayal of Elizabeth

In this Risk Scenario, Risk & Insurance explores what might happen in the event a telemedicine or similar home health visit violates a patient's privacy. What consequences await when a young girl's tele visit goes viral?
By: | October 12, 2020
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.


Elizabeth Cunningham seemingly had it all. The daughter of two well-established professionals — her father was a personal injury attorney, her mother, also an attorney, had her own estate planning practice — she grew up in a house in Maryland horse country with lots of love and the financial security that can iron out at least some of life’s problems.

Tall, good-looking and talented, Elizabeth was moving through her junior year at the University of Pennsylvania in seemingly good order; check that, very good order, by all appearances.

Her pre-med grades were outstanding. Despite the heavy load of her course work, she’d even managed to place in the Penn Relays in the mile, in the spring of her sophomore season, in May of 2019.

But the winter of 2019/2020 brought challenges, challenges that festered below the surface, known only to her and a couple of close friends.

First came betrayal at the hands of her boyfriend, Tom, right around Thanksgiving. She saw a message pop up on his phone from Rebecca, a young woman she thought was their friend. As it turned out, Rebecca and Tom had been intimate together, and both seemed game to do it again.

Reeling, her holiday mood shattered and her relationship with Tom fractured, Elizabeth was beset by deep feelings of anxiety. As the winter gray became more dense and forbidding, the anxiety grew.

Fed up, she broke up with Tom just after Christmas. What looked like a promising start to 2020 now didn’t feel as joyous.

Right around the end of the year, she plucked a copy of her father’s New York Times from the table in his study. A budding physician, her eyes were drawn to a piece about an outbreak of a highly contagious virus in Wuhan, China.

“Sounds dreadful,” she said to herself.

Within three months, anxiety gnawed at Elizabeth daily as she sat cloistered in her family’s house in Bel Air, Maryland.

It didn’t help matters that her brother, Billy, a high school senior and a constant thorn in her side, was cloistered with her.

She felt like she was suffocating.

One night in early May, feeling shutdown and unable to bring herself to tell her parents about her true condition, Elizabeth reached out to her family physician for help.

Dr. Johnson had been Elizabeth’s doctor for a number of years and, being from a small town, Elizabeth had grown up and gone to school with Dr. Johnson’s son Evan. In fact, back in high school, Evan had asked Elizabeth out once. Not interested, Elizabeth had declined Evan’s advances and did not give this a second thought.

Dr. Johnson’s practice had recently been acquired by a Virginia-based hospital system, Medwell, so when Elizabeth called the office, she was first patched through to Medwell’s receptionist/scheduling service. Within 30 minutes, an online Telehealth consult had been arranged for her to speak directly with Dr. Johnson.

Due to the pandemic, Dr. Johnson called from the office in her home. The doctor was kind. She was practiced.

“So can you tell me what’s going on?” she said.

Elizabeth took a deep breath. She tried to fight what was happening. But she could not. Tears started streaming down her face.

“It’s just… It’s just…” she managed to stammer.

The doctor waited patiently. “It’s okay,” she said. “Just take your time.”

Elizabeth took a deep breath. “It’s like I can’t manage my own mind anymore. It’s nonstop. It won’t turn off…”

More tears streamed down her face.

Patiently, with compassion, the doctor walked Elizabeth through what she might be experiencing. The doctor recommended a follow-up with Medwell’s psychology department.

“Okay,” Elizabeth said, some semblance of relief passing through her.

Unbeknownst to Dr. Johnson, her office door had not been completely closed. During the telehealth call, Evan stopped by his mother’s office to ask her a question. Before knocking he overheard Elizabeth talking and decided to listen in.


As Elizabeth was finding the courage to open up to Dr. Johnson about her psychological condition, Evan was recording her with his smartphone through a crack in the doorway.

Spurred by who knows what — his attraction to her, his irritation at being rejected, the idleness of the COVID quarantine — it really didn’t matter. Evan posted his recording of Elizabeth to his Instagram feed.

#CantManageMyMind, #CrazyGirl, #HelpMeDoctorImBeautiful is just some of what followed.

Elizabeth and Evan were both well-liked and very well connected on social media. The posts, shares and reactions that followed Evan’s digital betrayal numbered in the hundreds. Each one of them a knife into the already troubled soul of Elizabeth Cunningham.

By noon of the following day, her well-connected father unleashed the dogs of war.

Rand Davis, the risk manager for the Medwell Health System, a 15-hospital health care company based in Alexandria, Virginia was just finishing lunch when he got a call from the company’s general counsel, Emily Vittorio.

“Yes?” Rand said. He and Emily were accustomed to being quick and blunt with each other. They didn’t have time for much else.

“I just picked up a notice of intent to sue from a personal injury attorney in Bel Air, Maryland. It seems his daughter was in a teleconference with one of our docs. She was experiencing anxiety, the daughter that is. The doctor’s son recorded the call and posted it to social media.”

“Great. Thanks, kid,” Rand said.

“His attorneys want to initiate a discovery dialogue on Monday,” Emily said.

It was Thursday. Rand’s dreams of slipping onto his fishing boat over the weekend evaporated, just like that. He closed his eyes and tilted his face up to the heavens.

Wasn’t it enough that he and the other members of the C-suite fought tooth and nail to keep thousands of people safe and treat them during the COVID-crisis?

He’d watched the explosion in the use of telemedicine with a mixture of awe and alarm. On the one hand, they were saving lives. On the other hand, they were opening themselves to exposures under the Health Insurance Portability and Accountability Act. He just knew it.

He and his colleagues tried to do the right thing. But what they were doing, overwhelmed as they were, was simply not enough.


Within the space of two weeks, the torture suffered by Elizabeth Cunningham grew into a class action against Medwell.

In addition to the violation of her privacy, the investigation by Mr. Cunningham’s attorneys revealed the following:

Medwell’s telemedicine component, as needed and well-intended as it was, lacked a viable informed consent protocol.

The consultation with Elizabeth, and as it turned out, hundreds of additional patients in Maryland, Pennsylvania and West Virginia, violated telemedicine regulations in all three states.

Numerous practitioners in the system took part in teleconferences with patients in states in which they were not credentialed to provide that service.

Even if Evan hadn’t cracked open Dr. Johnson’s door and surreptitiously recorded her conversation with Elizabeth, the Medwell telehealth system was found to be insecure — yet another violation of HIPAA.

The amount sought in the class action was $100 million. In an era of social inflation, with jury awards that were once unthinkable becoming commonplace, Medwell was standing squarely in the crosshairs of a liability jury decision that was going to devour entire towers of its insurance program.

Adding another layer of certain pain to the equation was that the case would be heard in Baltimore, a jurisdiction where plaintiffs’ attorneys tended to dance out of courtrooms with millions in their pockets.

That fall, Rand sat with his broker on a call with a specialty insurer, talking about renewals of the group’s general liability, cyber and professional liability programs.

“Yeah, we were kind of hoping to keep the increases on all three at less than 25%,” the broker said breezily.

There was a long silence from the underwriters at the other end of the phone.

“To be honest, we’re borderline about being able to offer you any cover at all,” one of the lead underwriters said.

Rand just sat silently and waited for another shoe to drop.

“Well, what can you do?” the broker said, with hope draining from his voice.

The conversation that followed would propel Rand and his broker on the difficult, next to impossible path of trying to find coverage, with general liability underwriters in full retreat, professional liability underwriters looking for double digit increases and cyber underwriters asking very pointed questions about the health system’s risk management.

Elizabeth, a strong young woman with a good support network, would eventually recover from the damage done to her.

Medwell’s relationships with the insurance markets looked like it almost never would. &


Risk & Insurance® partnered with Allied World to produce this scenario. Below are Allied World’s recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance.®.

The use of telehealth has exponentially accelerated with the advent of COVID-19. Few health care providers were prepared for this shift. Health care organizations should confirm that Telehealth coverage is included in their Medical Professional, General Liability and Cyber policies, and to what extent. Concerns around Telehealth focus on HIPAA compliance and the internal policies in place to meet the federal and state standards and best practices for privacy and quality care. As states open businesses and the crisis abates, will pre-COVID-19 telehealth policies and regulations once again be enforced?

Risk Management Considerations:

The same ethical and standard of care issues around caring for patients face-to-face in an office apply in telehealth settings:

  • maintain a strong patient-physician relationship;
  • protect patient privacy; and
  • seek the best possible outcome.

Telehealth can create challenges around “informed consent.” It is critical to inform patients of the potential benefits and risks of telehealth (including privacy and security), ensure the use of HIPAA compliant platforms and make sure there is a good level of understanding of the scope of telehealth. Providers must be aware of the regulatory and licensure requirements in the state where the patient is located, as well as those of the state in which they are licensed.

A professional and private environment should be maintained for patient privacy and confidentiality. Best practices must be in place and followed. Medical professionals who engage in telehealth should be fully trained in operating the technology. Patients must also be instructed in its use and provided instructions on what to do if there are technical difficulties.

This case study is for illustrative purposes only and is not intended to be a summary of, and does not in any way vary, the actual coverage available to a policyholder under any insurance policy. Actual coverage for specific claims will be determined by the actual policy language and will be based on the specific facts and circumstances of the claim. Consult your insurance advisors or legal counsel for guidance on your organization’s policies and coverage matters and other issues specific to your organization.

This information is provided as a general overview for agents and brokers. Coverage will be underwritten by an insurance subsidiary of Allied World Assurance Company Holdings, Ltd, a Fairfax company (“Allied World”). Such subsidiaries currently carry an A.M. Best rating of “A” (Excellent), a Moody’s rating of “A3” (Good) and a Standard & Poor’s rating of “A-” (Strong), as applicable. Coverage is offered only through licensed agents and brokers. Actual coverage may vary and is subject to policy language as issued. Coverage may not be available in all jurisdictions. Risk management services are provided or arranged through AWAC Services Company, a member company of Allied World. © 2020 Allied World Assurance Company Holdings, Ltd. All rights reserved.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]