Reputational Risk: Problems with Understanding the Concept and Managing Its Impact

Ewa Miklaszewska; Krzysztof Kil

Published: 2023-11-21

Vol. 65 No. 4 (2016)

Reputational Risk: Problems with Understanding the Concept and Managing Its Impact

Ewa Miklaszewska , Krzysztof Kil

Abstract

Interest in reputational risk as a self-standing type of risk is relatively new. The research is driven not so much by regulatory requirements, but by stakeholders’ interest. Therefore, the purpose of this article is to trace the sources of reputational risk and consequences of the problems associated with a bank’s negative reputation. The paper focuses on the differences in the definitions and methodological problems of its measurement. The empirical part proposes a new index measuring reputational risk, based on the perspectives of important stakeholders. The panel models analyse the impact of the index on bank performance in CEE.

Keywords:

reputational risk , reputational index , performance of CEE banks

Download files

PDF (Język Polski)

Citation rules

Miklaszewska, E., & Kil, K. (2023). Reputational Risk: Problems with Understanding the Concept and Managing Its Impact. Safe Bank, 65(4), 96–115. Retrieved from https://ojs.bfg.pl/index.php/bb/article/view/277

Licence

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

Most read articles by the same author(s)

Ewa Miklaszewska, Mateusz Folwarski, Krzysztof Kil, Marcin Idzik, Cooperative Banks and the New Technological Challenges in the Light of a Results Survey , Safe Bank: Vol. 72 No. 3 (2018)
Mateusz Folwarski, Krzysztof Kil, Opportunities and threats of cooperative banking in Poland in a turbulent economic and social environment , Safe Bank: Vol. 92 No. 3 (2023)
Ewa Miklaszewska, Stability of large banks: lessons from financial crises , Safe Bank: Vol. 92 No. 3 (2023)
Krzysztof Kil, Ewa Miklaszewska, The impact of deposit guarantee schemes on bank stability - the experience of periods of systemic instability , Safe Bank: Vol. 98 No. 1 (2025)
Ewa Miklaszewska, The application of bail-in tool in a bank resolution framework: the evidence from the Italian local and regional banks , Safe Bank: Vol. 69 No. 4 (2017)
Krzysztof Kil, Determinants of the Polish Cooperative Banks Financial Liquidity in the Post-Crisis Perspective , Safe Bank: Vol. 72 No. 3 (2018)
Ewa Miklaszewska, Krzysztof Kil, The Role of Diversity of Banking Models: Position and Prospects of Polish Cooperative Banks , Safe Bank: Vol. 55 No. 2 (2014): Bezpieczny Bank/Safe Bank

References

ACE: Reputation at Risk, London 2013, www.acegroup.com/global-assets/documents/ Europe-Corporate/ThoughtLeadership/ace_reputation_at_risk_july_2013.pdf.
Google Scholar

American Banker: Survey of Bank Reputation, 2016, www.americanbanker.com.
Google Scholar

Basel Committee on Banking Supervision: Consultative Document: Operational risk, BIS, January 2001.
Google Scholar

Basel Committee on Banking Supervision: Proposed Enhancements to the Basel II Framework. Consultative Document. Bank for International Settlement, July 2009.
Google Scholar

Basel Committee on Banking Supervision: Principles for the Sound Management of Operational Risk, BIS, June 2011.
Google Scholar

Basel Committee on Banking Supervision: Review of the Principles for the Sound Management of Operational Risk, October 2014.
Google Scholar

Brown W.J., Understanding Reputational Risk: Identify, Measure, and Mitigate the Risk, www.philadelphiafed.org/bank-resources/publications/src-insights/2007/fourthquarter/q4si1_07
Google Scholar

Business Insurance: Reputation risk in focus at credit rating agencies, August 1st, 2016.
Google Scholar

Carretta A., Farina V., Schwizer P., M&A and Post Merger Integration in Banking Industry: the Missing Link of Corporate Culture, XVI Tor Vergata Conference on Banking and Finance, Rome, December 2007.
Google Scholar

Dermine J., European Banking Integration: Don’t Put the Cart before the Horse, Financial Markets, Institutions & Instruments 15(2), 2006.
Google Scholar

Dey S.K., Reputational Risk in Banking – The Current Approach and A Way Ahead, TCS Financial Solutions, www.tcs.com (accessed 06.2016).
Google Scholar

Diermeier D., Measuring and Managing Reputational Risk, Risk Management no. 12/ 3, March 2008.
Google Scholar

Dow S., Managing Stakeholder Expectations, [in:] Reputational Risk Management in Financial Institutions, Risk Books Incisive Media Investments Ltd, London 2014.
Google Scholar

Eckert Ch., Gatzer N., Modeling operational risk incorporating reputational risk: an integrated analysis for financial firms, FAU Working Paper, August 2015 www.vwrm.rw.fau.de /files/2016/05/Reputation_Risk_2015-08-14_WP.pdf
Google Scholar

The Economist, Reputation: Risk of Risks, The Economist Intelligence Unit, Dec. 2005.
Google Scholar

Edelman Trust Barometer: Trust in Financial Services, 2014 and 2016, ww.edelman.com/insights/intellectual-property/2016-edelman-trust-barometer/state-of-trust/trust-in-financial-services-trust-rebound.
Google Scholar

European Banking Authority: Risk Assessment of the European Banking System, 2014, 2015, 2016; https://www.eba.europa.eu/documents.
Google Scholar

Ernst and Young: Building a Better Working World. Global Consumer Banking Survey 2014.
Google Scholar

Fiordelisi F., Molyneux P., Shareholder Value in Banking, Palgrave Macmillan, Basingstoke 2009.
Google Scholar

Fiordelisi F., Soana M., Schwizer P., The Determinants of Reputational Risk in the Banking Sector, Journal of Banking & Finance, vol. 37, no 5, 2013.
Google Scholar

Fox M., Gilson R., Palia D., Corporate Governance Changes as a Signal: Contextualizing the Performance Link, European Governance Institute Working Paper no. 323, August 2016.
Google Scholar

FSB: Increasing the Intensity and Effectiveness of SIFI Supervision Progress Report to the G20 Ministers and Governors, November 2012, www.fsb.org/wp-content/uploads/r_121031 ab.pdf
Google Scholar

Grothe M., Market Pricing of Credit Rating Signals, ECB, Working Paper no 1623, Dec. 2013.
Google Scholar

Guiso L., Sapienza P., Zingales L., Does Culture Affect Economic Outcomes?, Journal of Economic Perspectives no. 20, 2006.
Google Scholar

Guillen M., Tschoegl A., Building a Global Bank: The Transformation of Banco
Google Scholar

Santander, Princeton University Press, Princeton 2008.
Google Scholar

Kaiser T., Reputational Risk Management Across the World: A Survey of Current
Google Scholar

Practices, [in:] Reputational Risk Management in Financial Institutions, Risk Books
Google Scholar

Incisive Media Investments Ltd, London 2014.
Google Scholar

Kil K., Impact of Financial Safety on Annual Market Rate of Return on Banks’ Stocks in the Countries of Central and Eastern Europe, [in:] Finance and Risk: Proceedings of the 17th International Scientific Conference, Vol. 2., Publishing House EKONÓM, Bratislava 2015.
Google Scholar

Koch T.W., Scott MacDonald S., Bank Management, Cengage Learning, Boston 2015.
Google Scholar

Marcinkowska M., Kapitał relacyjny banku: Ksztaltowanie relacji banku z otoczeniem, t. 1, Wyd. Uniw. Łódzkiego, Łódź 2013.
Google Scholar

Marcinkowska M., Corporate governance w bankach, teoria i praktyka, Wyd. Uniw. Łódzkiego, Łódź 2014.
Google Scholar

Masiukiewicz P., Międzynarodowe bankructwa i afery bankowe. SGH, Warszawa 2009.
Google Scholar

McKinsey: The future of bank risk management, McKinsey Working Papers on Risk, McKinsey & Company, Dec. 2015.
Google Scholar

Micocci M., Masala G., Cannas G., Flore, G., Reputational Effects of Operational Risk
Google Scholar

Events for Financial Institutions, University of Cagliari Working Paper, http://www.actuaries.org/AFIR/Colloquia/Rome2/Micocci_Masala_Cannas_Flore.pdf
Google Scholar

Miklaszewska E., Kil K., The Impact of the 2008 Crisis on the Banking Sectors of the CEE-11 Countries: Multi Level Performance (MLP) Score as a Synthetic Measure of Bank Risk Adjusted Performance, Econometrics nr 4 (50), 2015.
Google Scholar

Morris N., Vines D., Capital Failure: Rebuilding Trust in Financial Services, Oxford Univ. Press, Oxford 2014.
Google Scholar

Perry J., de Fontnouvelle P., Measuring Reputational Risk: The Market Reaction to Operational Loss Announcements. Federal Reserve Bank of Boston, October 2005.
Google Scholar

Raiffeisen Research: CEE Banking Sector Report, June 2015.
Google Scholar

Rajan R., Has Financial Development Made the World Riskier? NBER Working Paper Series no. 11728, Nov. 2005, http://www.nber.org/papers/w11728
Google Scholar

Schoenmaker D., The European Banking Landscape after the Crisis, DSF Policy Paper no. 12, April 2011.
Google Scholar

S&P: Standard & Poor’s Ratings Definitions, Feb. 1, 2016, www.standardandpoors.com/ ratingsdirect.
Google Scholar

Steinhoff C., Sprengel R., Governance as the Starting Point for a Reputational RiskManagement Process, in: Reputational Risk Management in Financial Institutions, Risk Books Incisive Media Investments Ltd, London 2014.
Google Scholar

Walter I., Reputational Risk and Financial Crisis, in: Pinedo M., Walter I.: Global Asset Management, Palgrave Macmillan, New York 2013.
Google Scholar

Walter I., Reputational Risk and Large International Banks, Financial Market Portfolio Management, vol. 30, no. 1, February 2016, pp. 1–17.
Google Scholar