Defining and managing reputation risk

Defining and managing 

reputation risk 

A framework for risk managers 

Guide 2015

Contents 

Introduction.............................................................................................. 4 

The business case for reputation.......................................................... 5 

Section 1: The building blocks of reputation........................................ 7 

Understanding the reputational risk to an organisation.............................. 9 

The current reputational risk landscape.................................................... 12 

Section 2: Managing reputational risk................................................. 14 

The Reputation Risk Management Process............................................... 15 

Section 3: Reputation Institute – Reputation risk case studies........ 18 

Reputation risk case study: Workplace Agreements–VW: 

Not a Win-Win Negotiation in Mexico........................................................ 19 

Reputation risk case study: Service Changes–SNCF: 

A ‘Big Bang’ for French Rail Timetables.................................................... 22 

Reputation risk case study: Job Losses–Research In Motion: 

Job Cuts Amid Instability........................................................................... 25 

Appendix 1: Reputational risk management framework................... 28 

Appendix 2: Reputational risk dimensions and 

critical stakeholders........................................................ 30 

Appendix 3: Reputation risk management in 

practice: Product Recall.................................................. 32 

Airmic would like to thank Reputation Institute, which has shared 

its approach to defining and valuing an organisation’s reputation. If 

you would like more information on this framework please contact 

Kasper Ulf Nielsen (knielsen@reputationinstitute.com) 

About Reputation Institute 

Reputation Institute is the world’s leading reputation management 

consultancy, enabling leaders to make more confident business 

decisions. Independently owned and founded in 1997, Reputation 

Institute is the pioneer in reputation management operating in 30 

countries. Through reputation insights and advice Reputation Institute 

enables leaders to make business decisions that build and protect 

reputational capital and drive competitive advantage. 

For more information, visit: www.reputationinstitute.com 

To find your local office please visit our website: 

www.reputationinstitute.com/contact-us

Introduction 

The objective of the guide is to enable risk managers to lead 

an organisation’s approach to reputational risk management. 

The guidance sets out a framework for breaking down the 

elements of an organisation that govern its reputation. Risk 

managers can use this framework to identify the possible 

risk events that affect each of these dimensions, and the 

stakeholders that are subsequently affected. This will allow for 

a structured approach to managing reputational risk. 

Reputation risk is an ongoing yet growing concern for companies. 

Airmic members report reputational risk as both their number 

one ‘keep’s me awake at night issue’ and a high concern for their 

executive management and Board. This is no surprise in today’s 

world where social media has made it possible for news to travel 

around the world within minutes and the perception of who you 

are as a company has a direct impact on several factors, including 

sales, stock price and licence to operate. High-profile incidents 

such as BP’s Deepwater Horizon oil spill disaster in 2010 alert 

companies that a reputational problem can cause short-term issues 

to develop into long-term impacts including reduced profits, loss 

of customers and key employees, and eventually a slump in share 

price. 

Despite this concern, only a third of Airmic members have a high degree 

of confidence in how their firms manage reputational risk and just 3% of 

members currently purchase insurance cover for reputational exposures. 

Airmic members specifically report that they face hurdles in determining 

how to define and value reputational risk. However, with pressure 

from above three-quarters of members plan to develop an approach 

to reputational risk management in the next 12 to 18 months. Kasper 

Nielsen, Executive Partner at Reputation Institute, can understand the 

difficulty: “Reputation is the perception others have of you. It’s a feeling, 

which makes it intangible. And managing something which is hard 

to define is difficult. To understand reputation you need to make the 

intangible tangible. You need to break down your reputation into specific 

components that you can measure and manage. Then you are able to 

identify the specific impact from a crisis or an issue on your reputation 

and manage it.” 

The goal is clear–to outline a systematic process for identifying, 

evaluating and mitigating reputation risk. Airmic engaged with 

Reputation Institute, whose RepTrak® framework identifies the seven 

‘reputation dimensions’, which govern how stakeholders perceive an 

organisation. 

This guide describes this framework and maps out a simple and 

structured approach for using it to manage reputational risk. In addition, 

the guide considers that although the current market for dedicated 

reputational products is limited, the individual events that can dent an 

organisation’s reputation often are insurable. This can place risk and 

insurance managers in a better position for leading the organisation’s 

response to reputational risk. Appendices at the end of guide provide 

example matrices which can be used to identify the possible events and 

the key stakeholders that determine an organisation’s reputation. 

4 

Airmic Technical

The business case for reputation 

The success of an organisation is dependent upon its 

stakeholders supporting it. John Ludlow, SVP and Head of Global 

Risk Management at Intercontinental Hotels Group expands: 

“Reputation is a big chunk of intangible value which maintains 

the confidence of stakeholders such as the company’s owners, 

suppliers, governments and other businesses, who sit among its 

customers”. To gain the support of the stakeholders an organisation 

must deliver on the following: 

Products and services that customers both buy and recommend 

Compliance with applicable requirements to obtain a ‘license to operate’ 

from regulators 

Financial performance which ensures financial analysts will recommend 

its stock 

An appropriate marketing strategy which engages the media 

Employees who can deliver on its strategy. 

Therefore, it is critical that stakeholders, customers, regulators, financial 

analysts and investors, media, business partners and employees are 

confident in the output of the organisation and trust that it can deliver on 

its promises. This trust in the company underpins its reputation. In order 

to gain this trust, an organisation needs to deliver across seven core 

areas: 

Products / services 

Innovation 

Workplace 

Governance 

Citizenship 

Leadership 

Performance 

5 

Reputational Risk Guide 2015

Reputation Institute defines reputation as the emotional 

connection between stakeholders and organisation. 

This reputation can be measured by the level of trust, admiration, 

respect and good feeling from its stakeholders. Reputation Institute 

measures reputation on a scale from 0-100, where the global 

average for companies is 64. 

• 0-40 is considered weak 

• 40-60 moderate 

• 60-70 average 

• 70-80 strong 

• 80-100 excellent. 

Reputation Institute conducted a UK survey in 2015 which 

demonstrated clearly that companies with strong reputations 

see increased support from their key stakeholders. The survey 

specifically showed a strong correlation between a company’s 

reputation and a consumer’s willingness to recommend it to others 

and to buy from it. For companies with excellent reputations, 83% 

of consumers say they would definitely buy their products. This 

contrasts with only 9% of consumers who would do the same 

for companies with a weak reputation. The business case for 

companies to invest in their reputation is undeniable. 

Currently, word of mouth is the number one driver of sales and 

competitive advantage. Investing in reputation can affect the 

bottom line in that it drives recommendations and improves word 

of mouth. Reputation Institute has proven that an organisation 

that can move its reputation from weak to strong, can increase 

the number of consumers who will definitely say something 

positive about it from 8% to 50%. It is worth highlighting that a 

good reputation will positively influence the conversation on social 

media, which for many organisations is where the battle for sales 

growth is taking place these days. 

6 

Airmic Technical

Section 1: The building blocks of reputation 

Airmic members report that a key challenge in managing reputational 

risk is identifying the potential risk events. An organisation must be able 

to identify which issues and events will effectively dent its reputation 

and which events are unlikely to impact the opinions of its customers, 

employees and business partners. 

Reputation Institute has been studying reputation and the impact 

that perception has on business success for over 15 years, and has 

developed the RepTrak®, which measures and assesses reputation, 

based upon this research. This model expands on the idea that 

stakeholder trust, respect and good feeling towards an organisation 

arises from a number of different expectations. These expectations have 

been classified into the seven dimensions of the RepTrak® framework. 

Figure 1: The Reputation Institute 

RepTrak® framework 

Performance 

Profitable 

Strong growth prospects 

Better results than expected 

Products/Services 

High quality 

Value for money 

Stands behind products 

Meets customer needs 

Leadership 

Well organized 

Appealing leader 

Excellent managers 

Clear vision for its future 

FEELING 

ESTEEM 

ADMIRE 

Innovative 

First to market 

Adapts quickly 

Innovation 

Environmentally responsible 

Positive influence on society 

Supports good causes 

Citizenship 

TRUST 

Fair in business 

Behaves ethically 

Open and transparent 

Offers equal opportunities 

Rewards employees fairly 

Employee well-being 

Workplace 

Governance 

Building a strong reputation requires delivering on each 

dimension. If an organisation is perceived to be delivering 

on each of the seven dimensions by its stakeholders, the 

increased trust and support will build a strong reputation. In 

contrast, if an organisation isn’t perceived to be delivering on 

each dimension, stakeholders will lose trust, and subsequently 

not buy, recommend, invest in, work for or even give the 

benefit of the doubt to that organisation. 

7 


Reputation Institute describes a reputational risk event as one that 

can affect each of the dimensions in the following ways 

Products / Services: Issues that will reduce people’s belief that we 

deliver high quality products and services that are good value for the 

money 

Innovation: Issues that will reduce people’s belief that we are an 

innovative company that brings new products and services to the 

market first 

Workplace: Issues that will reduce people’s belief that we have the best 

employees and that we treat them well 

Governance: Issues that will reduce people’s belief that we are open, 

honest, and fair in the way we do business 

Citizenship: Issues that will reduce people’s belief that we are a 

good corporate citizen who cares about local communities and the 

environment 

Leadership: Issues that will reduce people’s belief that we have a clear 

vision for the future and are a well-organised company 

Performance: Issues that will reduce people’s belief that we are a 

profitable company with strong growth prospects. 

Kasper Nielsen, Executive Partner at Reputation Institute, “When 

a negative issue or crisis emerges the question is to what extend 

it will reduce the perception of the organization to deliver on the 

specific expectations within each dimension. In assessing this you 

can assess the reputation risk of any issue.” 

8 

Airmic Technical

Understanding the reputation risk to an organisation 

Organisations can assess a variety of risk events and issues against 

each of the dimensions laid out above, to gauge the effect on their 

overall reputation. 

Determine the reputational consequences of potential risk event 

When assessing the reputational damage caused by an event, the 

organisation must consider the extent to which the event will reduce 

people’s belief that the organisation is delivering on each dimension in 

turn. Table 1 provides example criteria to make this assessment, and 

risk events that may affect the assessment. Appendix 1 expands upon 

the consequences and affected stakeholders for some of the most 

significant risk events. 

9 


Table 1: The seven dimensions 

driving reputation 

Dimension Expectation Assessment criteria Potential risk events 

Products / 

services 

Organisation can 

deliver high-quality 

products and services 

at a good value 

The organisation: 

• Offers products that are of high quality 

• Offers products and services that 

are of good value for money 

• Stands behind its products 

and services 

• Meets customers’ needs 

• Product recall or product 

liability event 

• Supply chain failure, 

including reputational 

damage of a supplier 

• Customer complaints 

Innovation 

Organisation is 

innovative and brings 

new products to 

market 


• Is an innovative company 

• Is generally the first company to go to 

market with new products and services 

• Adapts quickly to market 

trends and changes 

• Lack of strategic thinking 

from senior management 

• Falling behind the market 

• Failed product launch 

• Failure to update technology 

platforms, e.g. on-line 

sales platforms 

Workplace 

Organisation treats its 

employees well 


• Offers equal opportunities 

in the workplace 

• Rewards employees fairly 

• Demonstrates concern for the health 

and well-being of its employees 

• Health and safety complaints 

/ compliance breach 

• Employee behaviour, e.g. fraud 

• Breach of ethical 

employment practice 

Governance 

Organisation is open 

and honest in the way 

it does business 


• Is fair in the way it does business 

• Behaves ethically 

• Is open and transparent in 

the way it does business 

• Breach of regulatory / 

statutory compliance 

• Fraud 

Citizenship 

Organisation is a good 

corporate citizen and 

takes responsibility for 

its actions 


• Is environmentally responsible 

• Supports good social causes 

• Has a positive influence on society 

• Environmental issue 

and lawsuits 

• Events causing 

major loss of life 

• Allegations of tax avoidance 

Leadership 

Organisation has a 

clear vision for the 

future of the company 

as well as its industry 


• Is a well-organised company 

• Has a strong and appealing leader 

• Has excellent managers 

• Has a clear vision for its future 

• Death / disgrace of 

senior management 

• Regulatory action, including 

criminal prosecution 

• Management behaviour 

• IT failure 

• Inappropriate incentive 

structures 

Performance 

Organisation delivers 

strong financial results 

that will ensure that 

the company is around 

for years to come. 

The organisation 

• Is a profitable company 

• Shows strong prospects 

for future growth 

• Shows better results than expected 

• Profit warning announcement 

• Loss of major contract 

• Major uninsured loss 

10 

Airmic Technical

Determine the stakeholders affected 

After having identified the individual dimensions affected by a risk 

event, the organisation will be in a position to identify the affected 

stakeholders. As not all dimensions are equally important to different 

stakeholders, the same event will have a different reputation risk impact 

depending on the stakeholder exposed to it. 

This figure, extracted from Reputation Institute’s 2015 survey 

with the Informed General Public in the UK, displays the relative 

importance of each of the seven dimensions for the UK general 

public when forming its perceptions about an organisation. The 

three most critical dimensions (coloured red) are Product/Services, 

Governance, and Citizenship. They make up 47.6% of the 

general public’s perception of a company. Risk issues and events 

impacting on these three dimensions have the potential to damage 

an organisation significantly, and therefore should be the focus of 

the reputational risk management efforts. 

Figure 2: Reputation Institute’s 

assessment of the 

weighting of each 

reputation driver 

Performance 

12.6% 


17.9% 

Leadership 

12.4% 

FEELING 

ESTEEM 

ADMIRE 

13.4% 

Innovation 

Citizenship 

14.3% 

TRUST 

15.4% 

13.9% 

Workplace 

Governance 

Factor Adjusted Regression 

n = 21,600 

Adj-R 2 = 0.697 

As all organisations are different, the risk manager must identify 

which stakeholders are most critical. Appendix 2 sets out an example 

framework for identifying which stakeholders are affected by each of 

the seven reputation dimensions identified by Reputation Institute. Risk 

managers are advised to work with senior management and all business 

units to populate this framework, and therefore determine which 

dimensions are of highest priority when managing reputation. 

11 


The current reputational risk landscape 

In March 2015, Airmic surveyed its members about their current 

strategies for defining and managing reputational risk, and asked: 

“Where do you see the greatest likelihood for reputational risks 

materialising in the future?” Figure 3 highlights that most member 

organisations believe that reputation risks are likely to arise within the 

governance of the organisation, i.e. 60% of member organisations 

are concerned about the potential for events or issues to reduce the 

perception of them as open, honest and fair in the way they do 

business. Additionally, 56% of member organisations believe issues 

may arise from the delivery of their products and services, and 44% are 

concerned about reputational issues arising from the leadership of the 

organisation. 

It is interesting to note that all seven of the reputational dimensions are 

considered to be critically important to Airmic member organisations. 

Appendix 1 describes a variety of possible risk events that can impact 

each of the seven reputational dimensions, and the impact of these on 

the organisation and the perceptions of its stakeholders. Organisations 

can work through this appendix, identifying which events may impact 

Figure 3: Area where reputation 

risk may materialise 

70 

60 

50 

40 

30 

20 

10 

% who would give the benefit of the doubt 

0 

Governance 

Products / Services 

Leadership 

Performance 

Citizenship 

Innovation 

Workplace 

on their reputation and therefore prioritising the dimensions that are of 

greatest significance to their reputation. 

It is worth highlighting–that within each risk event there is the potential 

for multiple reputational risks. For example a product recall will not 

only reduce stakeholders’ perceptions within Product/Services, but 

additionally there could be an effect on their perceptions of Leadership 

and Performance. Again, a legal issue will not only have a detrimental 

effect on the perception of Governance, but may also reduce the trust in 

the leadership of the organisation and its commitment to society. 

12 

Airmic Technical

Reputation institute’s summary: Defining your reputational risk 

Reputation Institute defines the reputation of an organisation 

as the level of trust, admiration, good feeling, and overall 

esteem a stakeholder has for that organisation. This reputation 

is driven by the perception of an organisation on seven specific 

dimensions, where a loss of trust in any dimension will cause 

a reduction in reputation. Reputation Institute therefore 

describes a reputation risk as “A negative event that will 

reduce the perception of you delivering on expectations.” 

The RepTrak® framework allows an organisation to measure the 

potential reputational risk of each negative event. This structured 

approach allows an organisation to consider the impact of a risk 

event on each of the seven dimensions from the perspective of 

perception. Organisation’s should both consider the magnitude 

(the objective quantification of the risk’s size put on a scale from 

low to high) and the likelihood (objective quantification of the risk’s 

probability put on a scale from low to high) when assessing the 

overall reputational risk of an event. This allows for prioritisation 

and action. 

13 


Section 2: Managing reputational risk 

Having identified the areas where reputational risk can arise within an 

organisation the risk manager should ensure that the right structure is 

in place within the organisation to deal with events that threaten the 

organisation 

Kasper Nielsen, from the Reputation Institute stresses the 

importance of looking at risk events through a reputational 

lens, and managing them accordingly, “Leading companies 

constantly monitor how stakeholders such as customers, 

regulators, key opinion leaders, employees and financial 

analysts perceive the company on the key dimensions of 

reputation. By understanding this perception, organisations 

can identify the potential risks before they happen and 

mitigate them before they turn into full blown reputation 

crises.” 

The importance of managing reputational risk and responding quickly to 

a risk event that can affect the reputation of an organisation is 

highlighted in Appendix 3. This appendix compares two reputational risk 

events involving product recall that were initially considered within the 

Airmic ‘Roads to Ruin’ research and highlights the importance of 

reputation in the ongoing success of the organisation. In the 

comparison, effective risk management at Coca-Cola meant that the 

product recall event had little impact on the reputation of the 

organisation and the long-term consequences were minimal. In contrast, 

the reputational effect of the incident at Land of Leather led to a huge 

decline in its reputation and brand, and subsequently the organisation 

went into administration. 

14 

Airmic Technical

The Reputation Risk Management Process 

Reputational risk management can be approached using the following 

process; 

Impact: Determining the severity of the event on the reputation of the 

organisation. 

It is important to understand the different types of reputation risk 

and their ‘multiplier’ effect. These can vary from industry to industry. 

This stage requires an assessment of the impact on the key internal 

stakeholders, especially when it comes to identifying risks and 

assessing the likelihood of these crystallising. 

Readiness: Establishing the appropriate controls and procedures to 

respond to the event. 

This factor defines how mature a company is in its reputation risk 

management processes, i.e. its ability to manage a negative event if and 

when it happens. Interviews with key internal stakeholders need to be 

conducted to understand alignment and capabilities. 

Monitoring: Understanding the effect on reputation over the long term. 

The organisation should adopt a process that tracks progress towards 

managing and mitigating reputation risk over time. 

Table 2 expands upon the steps in managing reputation risk. 

Figure 4: Reputation Institute’s 

reputational risk 

management pillars 

1. Impact 

2. Readiness 

3. Monitoring 

15 


Table 2: The reputation risk 

management process 

Impact 

A reputation risk framework must begin with an assessment of the magnitude and likelihood of 

the specific risks, leading to prioritisation and action. 

Readiness 

Assessing the internal capability to manage the reputation risk is as important as understanding 

the external impact of the risk event materialising. The organisation should prepare a blueprint 

of its capabilities to cope with risk. To do so, the organisation should understand the levels of 

integration (internal alignment) and the levels of responsiveness (preparedness to react). 

Impact and readiness represent the external and internal elements of reputation risk management 

respectively. By understanding the impact and preparing arrangements to respond to a risk event the 

organisation can respond to reputation risks in an effective and consistent way. 

Monitoring 

Monitoring tracks progress over the long-term and can provide an early warning for potential 

reputational risk. Reputation Institute recommends preparing a reputational scorecard, 

which allows the organisation to identify the reputation dimensions that are impacted as a 

consequence of an event, and how these change over time. Reputation Institute’s standard 

RepTrak ® scorecard compares the seven dimensions of reputation, against 23 single statements 

(attributes) distributed across the reputation dimensions. 

16 

Airmic Technical

Action Objective Process 

Risk identification 

Investigate the reputation 

challenges that the 

organisation has faced in 

the past, is facing currently 

and could potentially face 

in the future 

• Workshops with key internal stakeholders 

Comparison of risk event and reputational impact 

• Benchmark risk events and consequences occurring within other 

companies, e.g. through Reputation Institute’s database 

Assessment of 

reputation risks 

Evaluate the magnitude 

of each risk, as well as 

the likelihood of these 

becoming a reality 

• Map the consequences of each event against the 

individual dimensions of the RepTrak® framework 

• Prepare risk register displaying all reputational incidents 

Prioritisation of 

reputation risks 

View the risks threatening 

reputation and prioritise 

efforts accordingly 

• Consider the two variables of ‘magnitude’ and ‘likelihood’ 

Review and decide 

Map the risks and set 

specific goals 

• Prepare a specific action plan for each of the reputation risks identified 

• Consider control measures, resources and investment 

Review existing 

arrangement 

Consider responsibility and 

controls 

• Identify who is currently responsible for responding to reputation 

risks, i.e. a central response team or department heads 

Benchmarking 

Set up assessment and best 

practices benchmarks 

• Compare the reputational risk control arrangements with 

competitor companies and those considered ‘best in class’ 

• Identify opportunities to improve 

Set up risk controls 

and response 

arrangements 

Amend and improve existing 

arrangements 

• Ensure alignment with internal culture 

• Integrate external knowledge into the reputation risk architecture 

Launch 

Roll out new arrangements 

across organisation 

• Communicate across all business units and levels 

• Ensure clarity over who is responsible for co-ordinating 

and managing reputational risk response 

Risk mitigation Identify potential risks • Track the change in perception of an organisation across 

each dimension, for risks previously identified 

Measure reputation 

performance 

Implement a structured 

process for reputation risk 

measurement 

• Understand stakeholders’ perceptions and expectations 

across each dimension, for risks previously identified 

• Highlight where there are gaps / differences in perceptions of 

different dimensions, between different stakeholder groups 

• Compare perceptions with competitors and ‘best in class’ organisations 

• Analyse trends over time 

Map how a change in reputation can impact on company 

performance in terms of revenue, share price, etc. 

• Prepare KPIs which ensure the protection 

of reputation over the long-term 

17 


Section 3: Reputation Institute – Reputation risk case studies 

Section 1 and 2 of this guide describe a structured 

approach for identifying the key components, or 

dimensions, of an organisation’s reputation. This 

framework can be used by organisations to identify 

which functions of the business a risk event is likely 

to affect, and how stakeholder perception is likely to 

be altered by that event. 

Reputation Institute has studied the reputation 

of several organisations over 15 years and has 

investigated occasions where an organisation has 

faced a reputational crisis, i.e. events that threatened 

the levels of trust, admiration, respect and overall 

esteem in the organisation by its stakeholders. In 

the following case studies, Reputation Institute 

demonstrate that the reduced reputation is linked to 

events taking place within the business and that this 

drop in reputation can have the potential to impact 

the company’s profitability. The perception of an 

organisation can influence the intention to purchase 

from the organisation and, ultimately, its business 

results. 

Reputation Institute scorecards 

In each case study, we, Reputation Institute, outline the risk incident affecting the organisation 

and the consequences. This information is compared against two measures of reputation we 

calculate for organisations: the RepTrak® Pulse and the supportive behaviours of stakeholders. 

Calculating the RepTrak Pulse 

The RepTrak® Pulse score refers to the emotional connection to a company. It is an aggregated score 

of four RepTrak® Pulse Construct Variables; Trust, Admiration and Respect, Good Feeling and Overall 

Esteem. Each statement is rated on a scale from 1 to 7 where ‘1’ is the lowest and ‘7’ is the highest. 

These are converted into a 0-100 scale and adjusted for cultural differences. The seven RepTrak® 

dimensions are also measured on a scale from 1to 7 and converted into 0 to 100 scale. Each dimension 

measures a specific expectation towards the organisation: 

1. ‘Company X’ offers high quality products and reliable services 

2. ‘Company X’ is an innovative company in the products it offers or the way it does business 

3. ‘Company X’ is an appealing place to work and treats its employees well 

4. ‘Company X’ is a responsibly run company, which behaves ethically and is open and transparent 

in its business dealings 

5. ‘Company X’ is a good corporate citizen, supporting good causes and protecting the environment 

6. ‘Company X’ is a company with strong leadership with visible leaders and is managed effectively 

7. ‘Company X’ is a high-performance company, delivering good financial results 

Measuring the supportive behaviours 

Reputation drives support. To link reputation to the business case it’s important to also assess the 

specific supportive behaviour of stakeholders. How willing are stakeholders to buy, recommend, say 

something positive and give the benefit of the doubt in a crisis? All this can be measured on a scale from 

1 to 7 and provide a score from 0 to 100. 

18 

Airmic Technical

Reputation risk case study: Workplace Agreements–VW: Not a Win-Win Negotiation in Mexico 

Company details: 

Volkswagen de Mexico, 

S.A. de C.V. engages 

in the production, 

export, import, and 

sale of automobiles, 

engines, components 

and parts in Mexico and 

internationally. 

The company is based in Puebla, Mexico, and 

the plant is Volkswagen’s largest outside of 

Germany. The company operates as a subsidiary 

of Volkswagen AG and employs around 13,900 

people. 

Incident and consequences: 2011 was a prolific 

year for Volkswagen’s Mexican plant. By year-end, 

the production had hit a historic high of 500,000 

units produced, out of which 80% were destined 

for export. By July, the company had produced 

295,000 vehicles, 25% more than in 2010. 

When it was time for salary negotiations with the 

unions during the summer of 2011, both parties 

could not reach an agreement. Volkswagen’s union 

initially requested a 13% pay and benefits increase 

in light of the excellent results. The company 

countered with a 4.5% offer. As a result, 11,800 

of Volkswagen employees belonging to the union 

agreed to stage a strike on 18th August. 

Volkswagen is considered a big patron of the 

state of Puebla, sponsoring a range of activities 

from the professional soccer team to cultural and 

social activities but it is given very little leeway 

to negotiate when the financial situation is good, 

without being placed in the role of a haggler. 

During the negotiations, union leaders were very 

vocal to the media about Volkswagen’s counter 

offers, stating that with the proposed raises, 

workers could not regain their lost acquisitive 

power. Volkswagen remained silent in the public 

eye for the most part during the negotiations. 

Finally, seven hours before the strike was set 

to begin, an agreement was reached, which 

included a 6% pay rise, a 661 peso one-off 

payment for school supplies for all union members 

and employment contracts for 500 temporary 

workers. Almost as an afterthought, the company 

spokespeople made a public statement saying 

that the company expected the raises to translate 

into a commitment to reach the target record 

production by the end of the year. 

Volkswagen Mexico 

Gap Chart 2011 vs. 2012 (2011 as baseline) 

2011 2012 Gap 0.0 -5.0 -10.0 -15.0 -20.0 -25.0 

RepTrak ® Pulse 56.5 42.1 -14.4 

Products 56.4 39.5 -16.9 

Innovation 56.0 42.5 -13.5 

Workplace 54.3 41.4 -12.9 

Governance 56.9 43.0 -13.9 

Citizenship 56.5 37.5 -19.0 

Leadership 58.8 38.5 -20.3 

Performance 59.3 39.9 -19.4 

n = 101 n = 99 

19 


% who would recommend to others 

Agree 

Neutral 

100% 

80% 

32% 

Development 

Disagree 

Not sure 

60% 

40% 

20% 

47% 

40% 

46% 

-15% 

7% 

8% 

0% 

14% 21% 

2011 2012 

Agree 

Neutral 

Disagree 

Not sure 

% who would say something positive about 

100% 

80% 

60% 

40% 

20% 

0% 

47% 36% 

41% 

43% 

23% 

10% 

2011 2012 

Development 

-11% 

-2% 

13% 

Agree 

Neutral 

Disagree 

Not sure 


100% 

80% 

60% 

40% 

20% 

0% 

36% 

24% 

49% 

51% 

22% 

11% 

1% 5% 

2011 2012 

Development 

-11% 

-2% 

13% 

4% 

20 

Airmic Technical

Reputational risk management lessons for Volkswagen Mexico 

Being portrayed in the Mexican media as refusing 

to meet employees’ expectations (and mishandling 

a possible strike) severely affected Volkswagen’s 

reputation in the country. 

VW’s reputation experienced a dramatic drop 

in a single year in all seven dimensions, with 

strongest decline for Leadership, Performance and 

Citizenship, losing about 20 points. 

The strategy of being silent did not work well for 

VW. This left the only voice to the trade union, 

which communicated to the general public the 

story that VW’s top management did not act as a 

good corporate citizen, and does not care about 

their employees, the economy and well-being of 

the country. 

VW suffered a steep decline in the percentage 

of people who would recommend the company, 

say something positive about it or even give it the 

benefit of the doubt in a crisis. What is interesting 

to highlight is that most of the people who 

previously supported VW did not become neutral 

about the company, but moved for the most part 

to open disagreement with its practices. 

21 


Reputation risk case study: Service Changes–SNCF: A ‘Big Bang’ for French Rail Timetables 

Company details: Societe 

Nationale des Chemins de 

fer Francais (SNCF) is a 

provider of local and longdistance 

passenger and 

freight services in France. 

The group provides various transportation services 

including railway, road and overseas transportation 

of goods and passengers. It is headquartered in 

Paris and employed about 245,090 people as of 

31st December, 2011. 

Incident and consequences: On 11th December, 

2011, four million rail commuters woke up to a 

revolution at their local stations, with 85% of the 

timetables across France changing nearly 12,000 

journeys out of the daily 15,000. The media named 

this change in timetables the ‘Big Bang’ being 

the biggest overnight rescheduling in railway 

timetables ever attempted. 

Passenger groups claimed that the SNCF had 

used its timetabling ‘Big Bang’ to hide bad news. 

Some services, such as overnight trains from Paris 

to Bordeaux and direct trains from Bordeaux to 

Marseille, via Toulouse, had vanished altogether. 

In rural areas, local services had been reduced or 

trains no longer called at all the stops. Thousands 

of signatures were collected against the timetable 

changes and trains were prevented from leaving on 

the actual day by groups of disgruntled customers. 

Although the changes were necessary in order 

carry on modernization works on the railway 

network, and despite the fact that the company 

had spent €10 million in advertising the ‘Big Bang’, 

this event only seemed to worsen the decaying 

company’s reputation resulting from a strike earlier 

that year and threats of further strikes at Christmas 

and on New Year’s Eve. 

22 

Airmic Technical


Agree 

Neutral 

100% 

80% 

33% 26% 

Development 

Disagree 

Not sure 

60% 

40% 

20% 

0% 

49% 

46% 

16% 23% 

2011 2012 

-7% 

3% 

7% 

-3% 


Agree 

Neutral 

Disagree 

Not sure 

100% 

80% 

60% 

40% 

20% 

0% 

28% 

21% 

51% 

54% 

18% 

22% 

2011 2012 

Development 

-3% 

0% 

8% 

-5% 


Agree 

Neutral 

Disagree 

Not sure 

100% 

80% 

60% 

40% 

20% 

0% 

25% 

51% 

14% 

10% 

22% 

50% 

22% 

5% 

2011 2012 

Development 

-3% 

0% 

8% 

-5% 

23 


Reputation risk management lessons for SNCF 

As a result of the negative perceptions surrounding 

the service change, SNCF’s reputation deteriorated 

from 2010 to 2011, with an overall drop of 13 

points taking its reputation from average to weak in 

the eyes of the public. 

The two dimensions that were affected the 

most were Products/Services and Innovation, 

with a drop of over 12 points each. The change 

in perception clearly shows that the public did 

not perceive the service change to be positive 

even though SNCF had spent a lot of money 

communicating this change. 

The public also lost faith in the Governance 

and Citizenship aspect of SNCF where there 

was a drop of almost 12 points in one year. 

Although SNCF communicated a lot about the 

service change it was not perceived to be open 

and honest about this, and people did not fully 

understand or believe the message. The overall 

support for SNCF dropped across the board on all 

behaviours. Now, almost 25% of the general public 

would definitely NOT recommend, say something 

positive about or give the company the benefit of 

the doubt in a crisis. This loss of support was very 

damaging and has left the company with a steep 

challenge as it tries to turn around the business. 

24 

Airmic Technical

Reputation risk case study: Job Losses–Research In Motion: Job Cuts Amid Instability 

Company details: RIM 

researches, designs, 

manufactures and sells 

wireless communications 

products, services and 

software. 

Incident and consequences: With 12 million 

subscribers in 2007, RIM was Canada’s most 

profitable company. However, after the launch 

of the iPhone in June of that year and Google’s 

Android in 2008, the media and public attention 

shifted to these products, while RIM’s innovation 

attempts such as the BlackBerry Storm and 

the BlackBerry Torch fell short on expectations, 

causing RIM to lose the lead in the smartphone 

market. Additionally, the late launch of its iPad-like 

tablet, the PlayBook, was considered by analysts 

to be a specific failure. 

In 2011, as the company lowered its revenue 

forecast, it also announced a cut of about 11% 

of its workforce, eliminating 2,000 jobs across all 

functions worldwide in an effort to save money 

in the increasingly competitive smartphone and 

tablet market. However, the company lacked a 

strong enough technology roadmap to rely on 

and to assure employees that these job cuts were 

a solution that would provide the company with 

some stability. 

The following year didn’t provide much stability for 

the company. In September 2011, the company’s 

BlackBerry service suffered a massive network 

outage, impacting millions of customers for several 

days. The outage occurred as Apple prepared 

to launch the iPhone 4S, causing fears of mass 

defections from the platform. On 22nd January, 

2012, the two CEOs and founders of the company 

resigned and, in March, the company reported its 

first net loss in years, resulting in an announcement 

in June of an additional 5,000 job cuts. 

This second job cuts announcement happened 

at the same time as RIM announced a delay of 

at least six months to the launch of the much 

anticipated BlackBerry 10 platform. In such a 

scenario, both rounds of job cuts addressed an 

immediate need to save on costs, but did not 

address competition or provide any sense of 

stability to stakeholders inside and outside the 

company. 

25 



Agree 

Neutral 

100% 

80% 

Development 

Disagree 

Not sure 

60% 

40% 

20% 

0% 

36% 

55% 

41% 

39% 16% 

1% 

2011 2012 

-20% 

2% 

15% 

3% 


Agree 

Neutral 

Disagree 

Not sure 

100% 

80% 

60% 

40% 

20% 

0% 

36% 

60% 

47% 

35% 

11% 

1% 

2011 2012 

Development 

-24% 

12% 

10% 

1% 


Agree 

Neutral 

Disagree 

Not sure 

100% 

80% 

60% 

40% 

20% 

0% 

53% 

37% 

3% 

7% 

34% 

46% 

13% 

8% 

2011 2012 

Development 

-19% 

9% 

9% 

1% 

26 

Airmic Technical

Reputational risk management lessons for Research in Motion 

Research in Motion saw a reputation free fall 

from 2011 to 2012 based on the perception that 

management was not able to guide the company 

out of its troubles. Large job cuts were not 

managed well leading to a reputation drop of 18 

points in one year. 

The Performance dimension was the most 

affected, with a decrease of almost 28 points 

when compared to 2011. But this was not isolated 

to the company’s finance. as the perception of 

Leadership also dropped by a whopping 25 points. 

The lack of business results and the exit of the 

company founders and co-CEOs Jim Balsillie and 

Mike Lazaridis created an air of uncertainty about 

the future direction of the company. 

Although the main issues was the lack of response 

to competitors’ new products in the market, 

Products/Services and Innovation ‘only’ dropped 

14 points. So people clearly saw the problem as a 

leadership issue rather than an R&D issue. 

And the loss in reputation impacted the willingness 

to support the company. From having the support 

of 50-60% of consumers in Canada, RIM was 

left with the support of 34-36% of consumers. 

And from a situation where only 1% would say 

something negative about the company, a full 16% 

would now definitely not recommend the company 

to others. 

27 


Appendix 1: Reputational risk management framework 

Airmic has prepared the matrix below, which maps 

the seven dimensions of reputation proposed by 

Reputation Institute and considers how these can 

be affected by a specific risk event. For each risk 

event, Airmic considers how the event is likely to 

impact the organisation and those stakeholders 

whose perception is likely to be affected. The list of 

risk events is not exhaustive, and Airmic members 

can create their own tables for those events that 

are most likely to affect their organisation and their 

stakeholders. 

Finally, the matrix highlights where insurance 

coverage for the incident itself is available. Where 

insurance coverage for the event is available and 

can be purchased by the insurance / risk manager, 

Airmic members will be in a better position to 

engage with senior management and business units 

on the need for through and effective reputational 

risk management. The insurance market for pure 

reputational risk is beginning to develop, and Airmic 

members may wish to explore policy extensions for 

reputational impact for the covers detailed below. 

This can include a consequential drop in revenue as a 

result of a drop in reputation, and post-incident crisis 

management costs. 

Reputational 

dimension 


Expectation 

The organisation’s products are high in quality, value and 

service, and meet the customers’ needs 

Potential risk events 

Product recall event 

Innovation The organisation is innovative and adaptive Failure to update technology 

platforms, e.g. on-line sales 

platforms 

Workplace 

The organisation maintains good workplaces, treating 

and rewarding the employees fairly 

Health and safety compliance 

breach 

Governance The organisation is ethical, fair and transparent Breach of regulatory / statutory 

compliance 

Citizenship 

The organisation is environmentally friendly, a supporter 

of good causes and a positive contributor to society 

Environmental breach 

Leadership 

The organisation’s leaders are excellent and visionary 

managers, and strong endorsers of their companies 

Management behaviour, including 

fraud and mismanagement 

Performance 

The organisation has strong overall financial 

performance, profitability and growth prospects 

Profit warning announcement 

28 

Airmic Technical

Impact Key stakeholders Is insurance for 

the event available? 

• Recall costs 

• Litigation and settlement costs 

• Regulatory / criminal fines and penalties 

• Negative image and brand impairment 

• Reduced sales 

• Competitor advantage 

• Competitor advantage 



• Customers 

• Communities 

• Media 

• Customers 

• Employees 

• Business partners 

Product liability 

Product recall 

No coverage 


• Employee injury 

• Investigation costs 


• Employees 

• Regulators 


• Unions 

Employers’ liability 

• Fines and penalties 




• Investigation and remedial costs 




• Drop in share price 

• Fines and penalties 

• Settlement costs 

• Investigation costs 

• Loss of key employees 


• Reduced share price 

• Loss of key employees 

• Loss of advertising / key contracts 



• Investors and 

financial analysts 

• Customers 



• Media / press 



• Media / press 

• Customers 




• Suppliers and 

business partners 

D&O 

EIL insurance 

D&O 

No coverage 

29 


Appendix 2: Reputational risk dimensions and critical stakeholders 

The framework below demonstrates the relationship 

between the seven dimensions of reputation and the 

different groups of stakeholders, whose perceptions 

govern the reputation of an organisation. As detailed 

in Section 2 of the guide, individual stakeholders will 

have specific concerns depending on the purpose 

and output of the organisation. 

Airmic has populated the first matrix based on a 

generic organisation, using a red, amber and green 

colour-coding system to identify the type of action 

that should be taken for each relationship. Members 

can consider the relationships between the seven 

dimensions and their own stakeholders to populate 

their own version of the chart, and therefore to 

prioritise areas for risk management and control. 

Red: Controlling the reputational risk for this 

dimension / stakeholder relationship should be a 

management priority and impact analysis should 

be considered. Potential for significant financial 

consequences if the perception of this stakeholder is 

significantly reduced. 

Amber: Management attention is required. Controlling 

the reputational risk for this dimension / stakeholder 

relationship should focus on readiness and response 

to risk events. 

Green: Low priority relationship. Organisation 

should focus on monitoring the relationship between 

stakeholder perception and reputation dimension 

over the long term. 

Legend 

Stakeholder 

Priority 

Reputation 

dimension 

Customers 

Communities and the 

general public 

Attention Required 


Lower Priority 

Innovation 

Workplace 

Governance 

Citizenship 

Leadership 

Performance 

30 

Airmic Technical

Leadership 

Well organized 

Appealing leader 

Excellent managers 

Clear vision for its future 

Citizenship 

Performance 

Environmentally responsible 

Positive influence on society 

Supports good causes 

High quality 

Profitable 

Value for money 

Strong growth prospects 

Stands behind products 

Better results than expected 

Meets customer needs 

FEELING 

ESTEEM 

TRUST 

Fair in business 

Behaves ethically 

Open and transparent 


ADMIRE 

Innovative 

First to market 

Adapts quickly 

Offers equal opportunities 

Rewards employees fairly 

Employee well-being 

Workplace 

Innovation 

The Reputation Institute RepTrak® framework 

Building a strong reputation requires delivering on 

each dimension. If an organisation is perceived to 

be delivering on each of the seven dimensions by its 

stakeholders, the increased trust and support will build 

a strong reputation. In contrast, if an organisation 

isn’t perceived to be delivering on each dimension, 

stakeholders will lose trust, and subsequently not buy, 

recommend, invest in, work for or even give the benefit 

of the doubt to that organisation. 

Governance 

Employees 

Investors and 


Media / press 

Regulators 

Suppliers and 

business partners 

31 


Appendix 3: Reputation risk management in practice: Product Recall 

A comparison between how effective reputation risk management 

can impact on company performance can be seen in the Coca-Cola 

Dasani and Land of Leather product recall incidents. The following 

two case studies are extracted from the Airmic publication - Roads 

to Ruin (2011). 

Coca-Cola: Dasani Mineral Water (2004) 

Risk event: After a successful launch in the USA, Dasani began to be 

rolled out across the world. In Europe, the plan was to launch Dasani in 

the UK, and then follow-up in Germany and France. The half-litre bottles 

were priced at 95p and labelled as ‘pure’ water, although no mention 

was made of the tap water source, i.e. mains supply at Sidcup (half a 

litre of tap water costs 0.031p). 

Coca-Cola clearly underestimated the negative response by competitors 

and the UK media. There was an official complaint to the Food 

Standards Agency by the National Mineral Water Association over the 

purity claim. The press ran the story with headlines such as ‘Coca-Cola 

sells tap water for 95p’. 

The Dasani brand was seriously damaged; then a further blow was 

experienced in March when routine quality control analysis identified 

traces of bromate (a potential carcinogen) in the drink, which, though 

small, exceeded the legally permitted concentration. The contamination 

was suspected as having been introduced from a bad batch of mineral 

additives. 

Management response: The Coca-Cola Incident Management Team 

(IMCR) met and announced: 

• An immediate withdrawal of Dasani from the UK market 

• The roll-out to Germany and France was subsequently cancelled. 

The crisis team IMCR was rapidly invoked and took control. It set 

itself the objectives of protecting the global reputation of the Coca- 

Cola brand, protecting the reputation of the Dasani brand in 20 

countries outside Europe and acting responsibly in the UK. It decided 

to immediately withdraw the product from the UK market and held 

100 media interviews that day to clearly communicate the decision. 

The message was that it had volunteered to withdraw the product, it 

understood the problem and its significance, and knew how to fix it. 

Consequences of risk event: The consequence of the event was the 

loss of the Dasani business in the UK immediately (after a £7 million 

high-profile publicity campaign and expected sales of £35 million in its 

first year) and subsequently in Germany and France. However: 

• The Dasani brand was protected outside Europe. 

• Damage to the Coca-Cola brand was minimised 

in the UK and almost unaffected elsewhere. 

• Coca-Cola’s standing in risk management circles was enhanced. 

32 

Airmic Technical

Land of Leather Ltd (LOLL) (2007) 

Risk event: In September 2007, the company received complaints from 

a number of customers who had developed skin allergies from contact 

with the sofas that had been supplied to LOLL by Linkwise. Several 

thousand users who had bought these products from LOLL and other 

retailers were eventually affected, many of them suffering serious skin 

rashes. This gave rise to the biggest-ever group compensation claim 

brought in the UK courts. 

The origin of the allergies was traced to sachets of the mould-inhibiting 

chemical dimethyl fumarate (DMF), which had been stapled to the 

frames of the sofas, inside their leather covering. Dimethyl fumarate is 

an allergic sensitiser at very low concentrations, producing extensive, 

pronounced eczema that is difficult to treat. 

Management response: Once the problem became clear, LOLL 

withdrew the sofas from sale, but they did not contact the customers 

who had bought them, in contrast to Argos, which commissioned 

a report by a consultant dermatologist to verify the cause of the 

injuries, withdrew the sofas (of which they had sold some 30,000) and 

contacted the purchasers. Richard Langton, a senior litigator at a law 

firm that spearheaded a class action against LOLL, described this as a 

‘crucial failure’ and stated of his clients that: “All have been upset that 

household goods could hurt them in their own home.” 

Consequences of risk event: 

• The direct effects of the ‘toxic sofa’ cases included injuries to 

at least 4,500 people and claims by them against the firms who 

sold the furniture, including LOLL, in the region of £20 million. 

• Added to these were the substantial costs incurred 

by the companies concerned in investigating the 

problem and managing and paying for the recall. 

• LOLL announced that it had entered into 

administration with Deloitte in Jan 2009 

• The collapse of LOLL meant loss of employment 

for a significant proportion of its 850 staff. 

33 


The link to reputational risk management and company 

performance. 

It cannot be stated, simply, that LOLL was brought down by the ‘toxic 

sofa’ cases, because there were many contributory causes to the 

demise of the company. Not least of these was the credit crunch, which 

made refinancing difficult and affected LOLL directly, and the economic 

recession born of the financial crisis, which hit retailers hard, putting 

many similar firms out of business. 

Having said all this, the damage to the reputation of LOLL brought about 

by the ‘toxic sofa’ scandal certainly made a very significant contribution 

to its difficulties. Many other firms, including Argos, Homebase and 

Walmsleys, sold the sofas, but quite apart from the fact that at least 

some of these handled the crisis better, their reputations suffered less 

because they were not associated exclusively leather furniture – the one 

and only culprit in the crisis. 

The handling of the ‘toxic sofa’ crisis reinforces the need to react quickly 

and positively where a product recall becomes necessary and to be 

open with customers, keeping them fully informed, even when the news 

is bad. Where LOLL failed to inform purchasers of the ‘toxic sofas’, 

Coca-Cola quickly realised the potential severity of the incident in terms 

of public trust and applied a textbook crisis management exercise, 

which nullified the impact to the overall business. Key points included: 

• Speed – the crisis team were called in early. 

• Control – it took immediate control of the crisis. 

• Authority – it had the determination and authority 

to make major decisions or had immediate access 

to executives who had such authority. 

• Clear priorities – it had a hierarchy of objectives and knew what 

it was prepared to sacrifice (Dasani UK) to achieve them. 

• Good stakeholder communication – there was 

immediate, co-ordinated communication, giving a simple 

message to a large number of opinion formers. 

• Transparency – it gave the full facts as it 

understood them at the time. 

34 

Airmic Technical


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Defining and managing reputation risk

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