Reputational Risk in Banking and Finance

Sanjeev Kaushik, Lifelong student of Banking & Finance.

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17 Videos (1h 2m)
    • Intro

      0:57
    • Class Contents

      2:03
    • Reputation is Everything-Northern Rock Bank

      5:52
    • Reputation is Everything-ICICI Bank

      3:42
    • Reptational Risk - Definitions (including Basel Committee Intro)

      4:32
    • Quantifying Reputation Risk - Valuing Intangibles

      3:08
    • Quantifying Reputation Risk - Understanding Goodwill

      4:52
    • Quantifying Reputation Risk - Royal Bank of Scotland (1)

      3:10
    • Quantifying Reputation Risk - Royal Bank of Scotland (2)

      6:10
    • Quantifying Reputation Risk - Basel Committee & Qualitative Approach

      4:03
    • Quantifying Reputation Risk - Quantitative Approach (1)

      4:42
    • Quantifying Reputation Risk - Quantitative Approach (2)

      3:28
    • Managing Reputational Risk

      4:22
    • Story of SunTrust Banks

      3:00
    • Advantages & Disadvantages

      1:08
    • Reputation vs Crisis Management

      2:51
    • Essence of Reputational Risk & Final Thoughts

      3:55

About This Class

 "All truths are easy to understand once they are discovered; the point is to discover them"

- Galileo Galilei

Got a name?

Everything in this world with a ‘name’ needs to deal with Reputational risk to avoid earning a ‘bad name’.

Be it individuals like us or big brand like Apple, onus is always on the name owner to protect it with all its might.

We all feel the urge to ensure that we are perceived by the world exactly how we want them to!

But it’s easier said than done! As the very difference between who we are and how the world perceives us; leads to a massive risk to our image.

 

Maintain it!

Although, it is totally acceptable to see an entity engaged in damage control while facing image crisis. Yet, when we see a company or even politicians; actively trying to manage people’s perception about themselves; we ironically tag them as manipulative or fake.

Thus, managing reputation is not an easy task as one needs to maintain a fine balance between being manipulative to being reactive after earning bad rap.

If managing reputation is such a challenging task, then what  happens when it’s a bank in question struggling with its deteriorating image in public?

 

Be Bankable..

While, we heavily rely on these institutions to keep our money safe & secure however, what if they lose our trust?

Wondering if it ever happened in the history of banking when people lost trust on their bank and rushed towards its branches to withdraw all their money?

Well, it happened and not just once but many times. Nations across the globe have seen banks falling due to Reputational crisis and bank run (a phenomenon when a considerable part of the bank’s customers withdraw their money at the same time due to the fear that the bank won’t fulfil its obligations).

If a bank run takes place, it doesn’t really matter whether the fear is well-founded or only based on rumours, the result will always be the same, bank failure. No bank can survive if all its customers withdraw their money at the same time. Thus, a bank run is a self-fulfilling prophecy, increases the likelihood of bank failures and destabilises the economy.

This also explains why it is so important for a bank to maintain its image of a trustworthy and sound institute as they are the flag bearers of a functional economy.

 

Because Reputation is Everything.

It’s not an easy task to characterize Reputation risk. We all know about it and have our own understanding on how to manage it.

For some, it is a specific risk with clear drivers and tangible business consequences, even if these are hard to quantify.

For others, it is a risk of risks that does not exist on a standalone basis.

A third perspective is that reputation risk is not a risk at all, simply an outcome of other risks.

While, these three views capture the 'essence of reputation risk' yet a lot is left unsaid about it.

Therefore, I decided to capture all the aspects of Reputational Risk in this course and you will find that there is much more to this risk than meets the ‘naked’ eyes.

Overview of Class

This class will take you through a journey of interesting case studies and real life stories entangled within the reputational risk concepts to ensure that the complex topics are demystified and you feel enlightened by the end the class.

We will cover the following topics in detail:

  • Hypothesis “Reputation is Everything”. Stories:
    • Northern Rock Bank
    • ICICI Bank
  • Global Definitions of Reputational Risk
    • 3 Major Definitions
    • Basel Committee on Reputational Risk
  • What is at Stake?
    • Valuing Intangibles
    • Goodwill vs Reputation
    • Story of Royal Bank of Scotland
    • Qualitative & Quantitative Approaches
  • Managing Reputational Risk
    • 5 Steps Process
    • Why Manage Reputation
    • Who Should Manage
    • Story of SunTrust Banks
    • Advantages & Disadvantages
  • Reputation Management vs Crisis Management
  • Rightful place of Reputational Risk
  • Essence of Reputational Risk
  • Final Thought

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Sanjeev Kaushik

Lifelong student of Banking & Finance.

Men are haunted by the vastness of eternity and so we ask ourselves, "Will our actions echo across the centuries, will strangers hear our name long after we are gone and wonder; who we were? How bravely we fought..how fiercely we loved....?"

Opening Narration - TROY 2004.

 

I consider myself a lifelong student of financial risk management and thoroughly enjoy my job as a risk professional, a career chosen carefully by choice and not by chanc...

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