REPUTATION AT RIsk - ACE Group

REPUTATION AT RISKProducts may also cover the costs of dealing withthe event, which may include the use of external PRand crisis management teams, and the operationalcosts of addressing the risk event, such as physicallyremoving products from the shelves. Some alsoinclude an advisory component, providing access tospecialist expertise to help companies prepare forand recover from a risk event.“From an insurance standpoint, it’s important thatcompanies can respond quickly,” says Mr Nornes.“What you don’t want is to have an incident occurand then have the company worried about theexpense of dealing with it. You want everyone tofocus on doing the right thing almost instantly, andthat’s where well-designed insurance can providean immediate benefit.”“ The emphasis is on helpingcompanies to respond in away that helps mitigate thedamage early and ideallypreventing reputational riskevents from happening in thefirst place.”Connie Germano, Regional Middle Market CasualtyManager for ACE in Continental Europe, points totwo areas where reputational risk managementplays an integral role in the company’s propositionfor mid-market companies in Continental Europe.The first is product recall, where the insurerprovides 24/7 access, with local languagecapability, to crisis management and PR experts inthe event of contamination or malicious tamperingfor food and drink companies. These services areparticularly valuable for mid-market companies,she believes, that don’t always benefit from thesame infrastructure and consultancy supportnetwork that larger companies have.parties to distribute their product in the US, forexample, face added potential litigation risk,something which ACE automatically covers.Second, reputational risk may be elevated if thecompany is not properly prepared to respond toproduct deficiencies (whether real or perceived)identified in a local market. According to MsGermano, the exporter needs to be certain thatit can respond quickly to an incident – especiallywhen venturing into a new market for the firsttime. ACE’s new proposition therefore providesimmediate crisis support and expenses coverfor companies purchasing a primary casualtyprogramme from the insurer. In the event thatthere is an export incident that is likely to involvethe casualty programme, the policy will providecatastrophe management support from externalexperts up to a certain limit as well as accessto PR expertise.Beyond the immediate crisis response, insurancebecomes more complex. Quantification oflong-term reputational risk damage remainschallenging, which makes it difficult to setparameters around insurance coverage.Reputational risk events can come from anywherein the business, which means that moving beyonda set of named triggers becomes very difficult.It is also hard to demonstrate direct causationbetween a reputational risk event and long-termdamage to financial performance.Ms Germano expects to see further developmentsin reputational risk insurance, but believes that themain emphasis should be on helping companiesto prepare for and prevent reputational riskevents. “The insurance community has becomemore comfortable with reputational risk andthere will continue to be experimentation anddevelopment but, for now, the emphasis is onhelping companies to respond in a way thathelps mitigate the damage early and ideallypreventing reputational risk events fromhappening in the first place.”The other area is export liability, where thecompany is developing a new solution for midmarketfirms exporting products overseas,an area where there is significant potentialreputational risk. First, companies using third19