Reputation events, such as cyberattacks, have a direct impact on share price, according to the findings of a new report released by Pentland Analytics with Aon plc, a leading global professional services firm providing a broad range of risk, retirement and health solutions.
The 2018 Reputation Risk in the Cyber Age study looked at 125 reputation events during the last decade, measuring the impact on shareholder value over the course of the following year. The report found that since the introduction of social media, the impact of reputation events on stock prices has doubled. In the wake of a crisis, the size of a company and the strength of its reputation did little to protect against the loss of value.
“Although risk management awareness and tools have evolved, reputation risk continues to weigh on corporate executives as one of their leading concerns. For the past 10 years, reputation risk has occupied one of the top spots on Aon’s bi-annual Global Risk Management Survey,” said Randy Nornes, Enterprise Client Leader, Aon. “Savvy companies that develop and use a robust risk management framework can not only better navigate reputation events, but can often see a net gain in value post-event.”
At times of crisis, investors often use information about a company shared on social media to re-assess their expectations of future cash flow, which can positively or negatively impact a company’s share price. Report findings showed that companies could add 20% of value or lose up to 30% of value depending on their reputation risk preparedness and management behaviour in the immediate aftermath of a crisis.
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