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Thursday, May 30, 2013

Reputation Risk

Risks and losses that are caused from reputational damage are not part of the Pillar I Basel II regulatory requirements, but a framework or reputation risk initiative still needs to be developed by risk departments in banks.

If banks are unable to dimension what drives reputational damage in their organisations, they can't really say they have completed Pillar II for Basel. In this blog posting, a small presentation has been supplied as the outcome of an exploratory exercise into how to launch a reputational risk campaign in a bank. This is one of the artifacts from a recent operational risk workshop that was run in Dubai.

Risk in Reputation
As it stands and in the backdrop of the credit crisis with no end, many banks have suffered substantial damage to their reputation and there is more than enough news out there to prove this point. Also what really counts when customers look at a bank's facilities is often missed by the departments that design these products. These types of concerns are trapped in the realm of reputation and need a response from the operational risk department.

Risk in Reputation Exercise | Martin Davies  [Presentation Link]

The presentation can be found at the following [Link] describes the types of efforts that banks risk departments may consider when they choose to understand what is causing losses from poor reputation. Additionally, if you want to model these causal factors, take a look at the Psych Package in R-Project and Joel Cadwell does a fantastic job in describing how the modelling can be done with his Engaging Market Risk Blog, more can be found here [Link].

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