The need to insure the reputation of companies has been stressed.
The Assistant Director, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr Tope Adaramola, who canvassed the inclusion of the option as an insurable product, said this is one of the insurable interests being practised by companies in advanced countries, adding that it would help to deepen insurance practice in Nigeria, as well as indemnify firms if they suffer losses as a result of reputation problems.
He explained that the concept refers to an interest in a person or thing that will support the issuance of an insurance policy; an interest in the survival of the insured or in the preservation of the thing that is insured, stating that in advanced countries where insurance is well accepted, almost everything is insurable.Even dancers are said to insure their waists, he added.
‘’For many’’, he said, ‘’these risks can be divided into operational, financial and business, with different individuals in the company being responsible for each one,’’ adding that while some big firms operating in Nigeria insure most of the different aspects of their operations, “one which has continued to cry for cover within and beyond our clime is image or reputation risk.
”We are definitely in an epoch when image matters above all things. This underscores the popular aphorism that image is everything. Whether as an individual or corporate institution, image projection and protection has remained a valued endeavour that must be factored into decisions of individuals or organisations.
“Image or reputation, as some prefer to call it, comprises the personality, which has to do with the character and ethos of the organisation regarding its operational behavior; identity, which is the totality of what you or your organisation says or wants to be seen as and perception, which denotes how stakeholders view your company or impression that they hold about the organisation”.
He stated that a company’s reputation is important because it affects the ways by which various stakeholders relate it. This applies to employees, investors, customers and the general public, and it influences such key issues as employee retention, customer satisfaction, customer’s loyalty and investor relations.
Hre said: “Organisations that will have sustainable existence need to constantly realise that reputation is built in the realm of the mind as a set of memories, perceptions and opinions that sit in your stakeholders’ consciousness.”
He argued that despite the crucial place of reputation, it is regretful that different stakeholders prioritise corporate reputation in a different order.
He cited investors’ financial performance as the most important characteristics followed by quality of management. For customers, however, the quality of services and products, together with customer service are the highest priorities, he said.
“Accountancy practices do not allow many companies to put a financial value on their own corporate reputation in the balance sheet. They treat the inclusion of individual product brand value or director’s reputation with a wave of the hand in their financial calculus. Despite all, Public Relations (PR) pundits have continued to hold the view that a company’s reputation conservatively constitutes between 66 and 100 per cent of its annual revenues.
‘’The question that may be agitating for answer therefore is; how can a company’s reputation be at a risk? Tope said the answer is simple. Although an occurrence or event on its own may rarely threaten a business reputation, more often than not, it is an event followed by poor management of the consequences that jeopardise corporate reputation. Events that sound reputation alarms include fraud, marketing fiasco, hostile take-over; loss of regulatory approval, etcetera, he explained. But how does the insurance industry mitigate reputation risks?’’ Tope said.
“Traditionally, there are different risks underwritten by the industry, such as occupational risks, property damage and employers liability. In such cases, quantifying the immediate losses involved is straightforward.
‘’For property, it is a case of establishing the value of the property and its liability, losses are defined by the courts. Additional losses such as the increased cost working, following an event, are often covered under insurance policies. What is not covered is the impact on the company’s reputation,’’. he added.
Of the various types of risks, reputation risk is perhaps the hardest for insurers to tackle he said. The reason is because reputation is essentially an intangible asset that accountants and specialist firms are still struggling to quantity in monetary terms.
