Reputational risk is the damage that can occur to a business when it fails to meet the expectations of its stakeholders and is thus negatively perceived. It affects any size company, regardless of what industry they are in or how big their operations may be-reputation hinges on customer satisfaction. 

Reputational risk is a very real thing in business. It can happen when the expectations of stakeholders – such as your customers, employees, and third-party suppliers- are higher than what you actually deliver on behalf of them. Risk comes from two sources: internal challenges for which there’s no tangible solution (e.g., poor quality control), or external factors that have little or nothing to do with how well someone performs his/her job.

Example of Reputational Risk

The Wells Fargo scandal of 2016 gave the public an up-close look at how banks are supposed to work. Retailers opened millions of unauthorized accounts, and pressure from supervisors caused them to do so; this resulted in fines for the company as well as penalties against certain employees who were either fired or pressured into resigning by regulatory agencies like The Office Of Comptroller(OCC). Customers also cut ties with their bank following investigations resulting in tarnished reputations which must now be rebuilt.

Companies that wish to maintain their reputation in the long term must ensure they have an effective internal control system and robust data protection strategies. This is necessary for regulatory compliance, preventing corruption from happening on your end (or anyone else), ensuring proper product quality management–both now and into perpetuity; maintaining safe working conditions so no one gets hurt while doing business with you; delivering timely information about what’s going down at all levels of operations which will keep investors happy too.

Reputational risk is the chance that your business will be damaged or destroyed by something bad happening. You should protect yourself against all types of risks, including operational ones like poor management and compliance-related issues such as not meeting industry standards for fines or criminal penalties.

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Imelda Bouchard is the owner of Gov Relations. She graduated with a degree in Business Administration in Finance​ at the University of Houston-Downtown. Imelda has over a decade of experience working in the finance industry. Following her stint at an international fintech company, she has decided to create a platform where businesses can make use of great business ideas.