Compliance Risk

What loss of trust costs companies in dollars and cents

More than half of the public companies world-wide analyzed in a new study suffered material reputational damage, causing them to miss out on as much as $180 billion in revenue, a report by Accenture PLC indicates.
The study, which looked at more than 7,000 public companies across 20 industries, calculated the financial impact that resulted from a loss of trust from stakeholders, including customers and employees.

Fifty-four percent of analyzed companies had an incident in the past two and half years that materially impacted their reputation, according to the report. The study defined “trust” as encompassing consistency, integrity and transparency.

See also The World’s Most Admired Companies“What makes business competitive today—it’s not the same set of rules that existed even 10 years ago,” said Bill Theofilou, a senior managing director at Accenture Strategy, the strategy consulting unit that conducted the study.

The loss of trust has a particularly large effect on companies in industries such as banking, utilities, and travel and transportation. For instance, a reputation incident that caused a two-point drop in a bank’s index score slowed its revenue growth by about 22%. A similar incident with the same drop in a consumer goods and services company’s index score would only cause a 3% drop in its revenue growth.

> Read entire article What loss of trust costs companies in dollars and cents | Mengqi Sun | Wall Street Journal

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