Careless talk costs reputations – and it may be left to the risk manager to help pick up the pieces
Eliot Spitzer, when he was New York state attorney, accomplished more than probably anyone else before him in dragging down the opaque barriers between insurer, broker and client and revealing some clearly anti-competitive procedures. The fall-out was huge, especially for leading brokers Marsh and insurer AIG, resulting in high level resignations.
I hate clichés, but clearly here the 'talk the talk, walk the walk' one has to apply. Spitzer himself is now disgraced and out of his New York governor’s office because of alleged connections with a prostitution ring.
The risk management message here relates to reputation and the limits of risk managers' control. Spitzer started well but he ran wild. Understandably, most – well let's say all – European risk managers will have no say in the messages that their CEOs put out to stakeholders, whether it be to investors, employees, members of the public, NGOs or whoever. You certainly cannot control their actions. And it is hard to plan risk management without some element of control.
“Reputational risk has to be high on every risk manager's agenda.
However, I would hope that on every risk manager's radar (and somewhere on the risk register although if board members are seeing this it may be hard for them to accept) is the possibility that one of the company's leading lights will actually do or say something which is going to be extremely detrimental for the company. We saw it in the UK when Gerald Ratner destroyed his retail jewellery company in a very short space of time by a few ill-considered remarks at an Institute of Directors dinner. Arguably, an effective fire-fighting PR-related risk management plan could have prevented, or at any rate limited the extent of, the debacle.
There are no doubt very good psychological reasons why people in high places choose to jeopardise their positions. But it is left to the organisations they work for to pick up the pieces. Reputational risk has to be high on every risk manager's agenda. You cannot predict who will go off the rails. Eliot Spitzer's supporters are no doubt licking their wounds over the demise of someone they thought was so committed to stamping out corruption.
Sue Copeman, Editor, StrategicRISK