Reputational risks of IHL violations

Reputational risks are closely linked legal and operational risks, and have the effect of reducing public trust in a company. Reputational risks are those that have a detrimental impact on a company’s reputation or lead to negative perceptions by customers, shareholders, partners, investors, media and other internal and external stakeholders.

The reputational risks associated with a company’s operations in conflict affected areas may include:

• negative public and media attention;
• loss of investor trust resulting in falling share prices;
• the cessation of business relationships;
• increased regulatory costs;
• increased stakeholder and media scrutiny of subsequent business activities;and
• being the target of NGO or shareholder activism

What a business does – or is perceived to do – badly in one location may adversely affect its operations elsewhere, leading to a reduced social licence to operate, lost opportunities and reputational damage.

Understanding and implementing the business responsibility to respect human rights is not only an effective risk management approach, but it also helps businesses build enduring relationships with local communities, employees and business partners which can be leveraged to reduce the potential operational impacts posed by reputational risks.

Now it’s your turn

We have discussed legal, operational and reputational risks to businesses operating in conflict zones. What other types of risks might businesses operating in conflict zones consider? Share your thoughts in the comments.