Reputational risk, protecting reputation and the benefits of an excellent reputation

A positive reputation of an organisation is essential to its success.

Treasury departments need to ensure that they do not do anything which could harm the organisation’s reputation.

Reputational risk

Reputation can be defined as the beliefs or opinions that are generally held about someone or something. Reputational risk is the risk of loss arising from damages to an organisation’s reputation, e.g. as a result of adverse publicity.

Protecting reputation

Treasury departments put in place controls which can prevent damaging occurrences, or reduce the negative consequences when things go wrong.

For example, treasury may confirm all transactions within a certain time to minimise the risk of error or fraud going undetected for an extended period which could result in additional cost to correct the mistake.

Benefits of an excellent reputation

There are many benefits of having an excellent reputation.

For example, others will trust the treasury department and so will be more willing to deal with it. When things go wrong, others will be more inclined to forgive the mistake. Inspections by regulators may be reduced in frequency and depth because the regulators probably will regard the department as low risk.