On Monday, August 19, a group of high-powered American executives, including seven of the large commercial insurers, published a statement on the role of shareholders in corporate governance that departs sharply from tradition. The “Statement on the Purpose of a Corporation” put forth by the Business Roundtable asserts that corporations have greater obligations beyond generating profits for shareholders. In short, they are responsible for creating better lives for all their stakeholders. Putting these parties first and treating them ethically is ultimately what keeps businesses going and the economy growing.
Shareholders have long been corporations’ top priority because disappointing them means withdrawal of their investment at best, and at worst, the potential for securities class action lawsuits. Businesses now operate in an environment of heightened reputation risk that has a tangible impact on income statements. Loss of customer loyalty and diminished brand value are real consequences of social irresponsibility, and these ultimately impact revenue and profit. As important as the change in priority might be overall, it will add to the growing reputational risk profile of every organization. That is one of the main reasons VCIA is hosting a webinar on reputational risk and how captive programs can help mitigate it, on October 23rd.
It can be said that reputation is a product of expectations. Often misunderstood and inadequately addressed, reputation risk is the peril of economic harm from leaving stakeholders disappointed and angry. Negative media and social media coverage are often a byproduct, amplifying that disappointment and anger. When reputational crises occur, they impact businesses commercially and financially, and their leadership personally. The August 2019 Business Roundtable declaration raises the stakes.
A captive program can be an effective vehicle for insuring reputational risk. A captive is in the unique position of being able to fund potential losses associated with stakeholder anger and disappointment, and by doing so signal to key stakeholders (employees, creditors & analysts, and regulators) that the company’s governance apparatus is very aware of the peril, and is confident that it is managing the risk well. And if the captive is at least partially reinsured in the open market, it then also demonstrates that an objective third-party has reviewed the company’s practices and is essentially “warrantying” the company’s governance.
So, join us on October 23rd for our webinar featuring Dr. Nir Kossovsky, CEO of Steel City Re, a leading source of integrated reputation risk mitigation solutions and insurances, and Machua Millett, Chief Innovation Officer for FINPRO U.S. and the General Partner Liability Product Leader at Marsh. Ably moderated by Maigh Wright, an associate actuary with Milliman, this webinar is guaranteed to burnish your reputation!
Thank you very much, and I look forward to hearing from you.