Location and Time:  Yale Club; New York, NY; November 20, 2014, 8:30am.

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Once every five years, 80 percent of public companies will experience management crises that drop their stock prices 20 percent. Yet, the company that manages that crisis correctly will not only bounce back but see its stock prices increase. Hear from the author/expert who was Counsel to President Clinton on Crisis Management. Learn how to handle a severe corporate crisis correctly. Find out what the insurance industry is doing to help. And know what to look for and, most important, what to avoid.

When a corporate reputation is tarnished, a company can lose its trust factor; investor confidence is weakened; and a company’s share price can be reduced.  In extreme cases, a damaged reputation can lead to a company’s downfall. “Hackgate,” “Rupertgate,” or “Murdochgate” -– names given by the press to the News International phone-hacking scandal – led to the demise of News of the World newspaper.

Let’s make a list of some leading triggers to reputation failure:

–unethical behavior such as Sears’ management team’s unrealistic performance quotas for its car repair business, which led to overbilling and created a scandal in the 1990s).

–financial irregularities, such as those that led to Enron’s bankruptcy.

–executive misconduct, such as the conviction tied to insider trading that led to Martha Stewart’s resignation.

–environmental violations, such as Nike’s exploitation of workers in sweatshops, failure to provide work environments that are safe and contact with cotton factories using slave labor—issues that dogged Nike through the 1990s and beyond.

–safety & health product recalls, such as followed allegations of “unintended acceleration” in Toyota cars.

–security breaches, such as the recent one at Target in which tens of millions of people had credit-card data stolen.

In other words, much as Murphy’s Law says:  “Anything that can go wrong will go wrong.”

What should a corporation do to protect its reputation?

–Use your CEO: Fred Smith, FedEx’s legendary founder, is a good example.  A good CEO embodies and reiterates a company’s values, code of ethics and vision.  Your CEO regularly communicates honesty and transparency and is trusted with your corporate reputation.

–Perform an S.W.O.T. analysis: Identify your company’s strengths, weaknesses, opportunities and threats.

–Develop a corporate reputation strategy:  Johnson & Johnson is still reaping reputation benefits more than 30 years after its swift and sweeping recall of Tylenol and institution of tamper-proof packaging after some maniac laced some pills with cyanide and put them in bottles on store shelves, killing seven people.

–Monitor your reputation online.  Constantly check social media sites and your own website. No company can afford to be reputation-blind, and no suit of armor is impenetrable.

–Be honest, factual and open with the media.

–Create a plan to manage an unexpected crisis.  Execution is the cornerstone. Train everyone on identifying the crisis, what to do and who gets contacted.   Preparation is essential to managing potential and actual crises in a timely fashion.  Communication is no longer one-way; it’s now two-way.

–Evaluate the purchase of corporate reputation insurance. For 20 years, the insurance industry has known that how a company manages a reputation crisis will have a dramatic impact on the cost of civil litigation arising out of that crisis.  For this reason, insurance purchased for the risk of shareholder lawsuits, directors and officers insurance, has from time to time included an option to purchase, or included automatically, “crisis management” insurance. This reimburses the company for the cost of crisis management expert fees up to a set amount, usually $50,000 to $200,000.

However, since 2010, there has been an outbreak of “new and improved” reputation insurance policies from name-brand insurance carriers like Zurich (Brand Assurance), AIG (ReputationGuard), Munich Re (Reputation Insurance) and a number of Lloyds syndicates, including a standalone reputation policy produced by Steel City Re.

Some carriers emphasize reimbursement of crisis-management expenses while others are more geared toward reimbursing a company for a loss. Finding the right one, or right combination, can be challenging, but they are worth a look.

Originally published in Insurance Thought Leadership, January 30, 2014. 

Solving the risk management issues surrounding reputation risk is a lucrative opportunity for the insurance industry. Here Ty Sagalow, president of Innovation Insurance Group discusses the potential impact of reputational risk and emerging risk transfer solutions.

Additional  Innovations in Insurance programs include interviews with Vince Tizzio, President/CEO of Navigators Management Company, Inc., and Pamela Newman of The Newman Team at Aon.

• How the industry was doing;
• Reputation Insurance a new product that Ironshore just launched
• Product development
• International expansion; and
• The biggest trend that will be impacting the insurance industries clients — Obamacare

The seminar will be held at the offices of Wilson, Elser.