The Market Impact of Reputation Crises

Sections of this topic

    Knowing the potential impact of negative events can help you properly prepare for crisis management

    The type of crisis you experience can drastically change the impact it has on your organization. To illustrate this point, Freshfields Bruckhaus Deringer conducted a study of 78 different crises of reputation, and created a chart documenting their impact on stock price:

    Here are their definitions of the various crises:

    • Behavioural – crises triggered by reports of the illegal or questionable conduct of the company in general or by specific employees, such as anti-competitive conduct or money laundering;
    • Operational – crises that seriously impair the company’s ability to function properly, for example major accidents or asset seizures;
    • Corporate – crises that affect the corporate and financial wellbeing of the organisation, including liquidity issues or material litigation; and
    • Informational – crises that seriously affect a company’s IT infrastructure or electronic systems, such as customer data loss or theft of commercial secrets.

    Knowing what to expect when you run into trouble enables you to prepare crisis management strategies that better suit your needs. Following the latest studies, and keeping on top of trends, is vital homework that could, quite literally, keep your organization alive.

    For more resources, see the Free Management Library topic: Crisis Management

    [Jonathan Bernstein is president of Bernstein Crisis Management, Inc., an international crisis management consultancy, author of Manager’s Guide to Crisis Management and Keeping the Wolves at Bay – Media Training. Erik Bernstein is Social Media Manager for the firm, and also editor of its newsletter, Crisis Manager]