Building a positive reputation is a long-term, often difficult process. Even worse, one mistake or any adverse event is enough to wreak havoc, causing a business crisis. Besides customer attrition, there might be more financial losses incurred. So apart from learning how to protect your reputation online, getting covered with reputation insurance/reputational risk insurance is highly recommended.
What Is Brand or Business Reputation?
A brand reputation, in more ways than one, is a perception of your past interactions with customers and expectations of future interactions. For example, customers who have had a great experience will consider your brand reputable and worthy of their trust. So most of them will do business with you again and expect to have the same experience in future transactions.
Benefits of Positive Business Reputation:
- Attract more customers
- Build loyal supporters
- Forge strong customer relationships
- Generate more sales and revenues
- Lower marketing costs
- Sets you apart from competitors
- More business and growth opportunities
- Attract higher-quality prospective employees
- Increase the value of the company
What Is Reputational Risk and Its Causes?
Reputational risks are events that can cause reputational damage. These adverse circumstances can be human error, accidents, acts of nature, etc. No organization, including large enterprises, is immune.
The underlying cause of reputational risk is when a business fails to meet the stakeholders’ expectations, which include investors, employees, customers, third-party suppliers, regulatory bodies and more.
Generally, the following are areas where reputational harm may occur and require crisis management measures:
- Management and Employee Conduct. The behavior of any person identified with the company, especially the founder, CEO, or any other high-ranking executives, can attract all kinds of attention. So any scandalous, malicious, or improper conduct or decision may produce a negative perception, causing reputational harm.
- Workplace Operation and Condition. Some companies may neglect the importance of maintaining a healthy workplace condition. Besides promoting harmonious interpersonal relationships, businesses must also reduce or eliminate occupational and safety hazards.
- Poor Product or Service Quality. Streamlining key processes can increase productivity and lower costs. Some companies, though, resort to cutting corners. Others neglect to inspect and ensure that all processes adhere to the company’s standards. As a result, the company may deliver faulty products to customers. In financial, eCommerce and other services relying on digital technology, a breach could occur, leading to the loss of sensitive data.
- Fail To Adapt to Changes. Business and consumer market conditions change. Some companies, unfortunately, fail to adapt to the changes. One example is failing to keep up with changing regulatory and industry expectations. At any rate, any time that a business fails to meet the stakeholders’ expectations can lead to reputational damage.
Even if you adopt measures to monitor online reputation and reduce the risk of reputational damage, it is not enough to prevent a business crisis. After all, an adverse event may also be caused by natural calamities and accidents. So it is best to know how to protect your reputation online or hire one of the best online reputation management companies to help create a crisis management plan.
What Is Reputational Risk Insurance/Reputation Insurance?
A business crisis can cause reputational harm, which is often very costly. In extreme cases, some companies had to shut down their operation. Reputation insurance, in this case, can help by easing the financial burden brought about by public image issues and negative press.
For the uninitiated, it is easy to mix up reputation and reputational risk insurance because they sound the same. But in reality, these are two different types of insurance.
Reputation insurance is a stand-alone policy that covers the financial loss brought about by reduced sales as a result of reputational damage. Unfortunately, the concept of reputation is abstract, which makes it difficult to underwrite a policy. Hence, determining the root cause of reputational damage is vague, which makes this cover very expensive.
Reputational Risk Insurance
Usually, only large organizations can afford reputation insurance as its premium is prohibitive. So instead of this stand-alone policy, a more affordable choice is to integrate reputational risk insurance into existing policies as an add-on.
Typical Sub-Categories of Reputational Risk Insurance:
- Business Owner’s Liability Insurance. Among the different types of reputational risk insurance, the business owner’s liability insurance has the most comprehensive coverage, providing minimal protection if a business faces legal action due to false or offensive advertising or issues relating to libel or slander.
- Crisis Management Insurance. Companies that perceive a need to use the services of public relations (PR) specialists to take care of negativities that may arise in the future can add crisis management insurance into their existing policies. Usually, the coverage of this insurance ranges from workplace harassment to data breaches and many others.
- Cyber Threat Insurance. This cover is more specific and protects businesses from adverse online events that involve sensitive customer data. Depending on the underwriter, it may also help companies that failed to manage online reputation and experienced decreased sales due to negative reviews.
How Much Does Reputation/Reputational Risk Insurance Cost?
The cost of reputation insurance depends on many factors: the industry, the size of the company, and its revenues. One reason is that some industries carry higher risks than others. Another is that the risks vary according to the industry.
Generally, the cost of general liability for small businesses starts at $500 annually. Often, this policy includes a reputation policy. In addition, other policies may include a reputation cover, such as cyber insurance.
As an add-on, the cost of reputational risk insurance varies. But to know how much it costs, take cyber insurance as an example, which costs around $1,500 annually.
While getting covered from reputational damages can significantly ease the financial burden, remember to always protect your reputation online. Online reputation management companies, for instance, can help manage online reputation, ensuring no negative press or reviews can harm your business.
Typically, they monitor online reputation using advanced tools to scan review sites and social media platforms for brand mentions. If they spot anything that can cause reputational harm, they would coordinate and help resolve issues before they go out of hand.
Although getting covered and hiring an agency to manage and monitor online reputation costs money, it may save you a fortune over the long term.
Get Covered To Reduce the Financial Burdens of Reputational Risks
When you manage online reputation, the best thing is that you are not only building and protecting your brand reputation. The strategies used can also help enhance lead acquisition and conversion rates. In addition, review generation strategies can help boost search engine optimization (SEO) to help you attract more customers.
But while you may have an effective reputation management strategy in place, do not disregard the importance of getting covered. Reputational risk insurance, for instance, can ease the financial losses brought about by unforeseen or harmful events that damage your reputation – from loss of sales to paying legal fees.
If you would like to know more about how to protect yourself from reputational damages, contact us at 866.325.0303. Our specialists are ready to answer your questions and discuss strategies that you can use to insulate yourself from harm while also solidifying your brand image.
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