Today, many risk managers regard managing the reputation of their organisation and its brand names as a top priority. With this in mind, Global Reinsurance organised a breakfast seminar in London in September to discuss different aspects of the topic. Global Reinsurance co-editor Lee Coppack acted as moderator.

John Bray: I have three principal points. First is the most important: consumer pressure, pressure from a variety of sources, is forcing companies to take public stances on complex issues, such as human rights, environment and labour which they would, perhaps, prefer not to discuss publicly but they now have to, because their reputation is at stake.

Secondly, why is this happening? It is happening, among other reasons, because of pressure from non-governmental organisations. Now I have something to say about them and, in particular, about one aspect of their activities which make their campaigns more effective - the internet.

The third point is how to assess these trends. Is it something like a fashion, which comes and goes, and we do not have to worry about? I will argue no, that movements, pressures perhaps, come in waves, possibly in cyclones, but the cumulative effect is permanent. This is a permanent issue. It affects all of us and will continue to do so.

Therefore, the conclusion is how does one manage this? One needs a comprehensive risk management policy, part of that is insurance but it is not just insurance. It is a whole wide range of measures.

First of all, about the non-governmental organisations - what am I talking about? You are all familiar with the biggest names, people like Greenpeace, Amnesty International and Oxfam. One fundamental point I want to make concerns variety. Just as there are large varieties in types of companies, large companies, small companies, corner shops and international conglomerates, so there are among non-governmental organisations. They vary according to size, according to the issues that they pick up on, according to personality, so to speak. By personality I am particularly referring to attitudes to business. Some are actively interested in
co-operation, some are highly antagonistic, many are highly suspicious, but there is a whole range.

There are non-governmental organisations or NGOs. This is something less familiar: environmental organisations, environmental non-organisations and even another variation with which you may be less familiar: GONGOS: government organisations' non-government organisations. Why are these people concerned at all about business? These people are assuming - generalisation - that business is important, because business collectively has power, they think, power for good, power for bad. I have a bit more to say about this, a general view that there is interest in co-operation with business as well as antagonism against business.

Why is the internet important? Pressure groups are not new. We can all remember the anti-apartheid campaign. Although we do not remember the 19th century anti-slavery campaign, there is an historical ancestry. The internet, however, makes a crucial difference in three critical respects. It is an instrument for information between groups, which means that as I titled the report, there is no hiding place.

The internet is an instrument for co-ordinating campaigns, for co-ordinating activities and for mobilising supporters. Boycotts are not new, they were part of the anti-apartheid repertoire, but they are potentially much more effective because of the internet. The boycott example I keep quoting is, especially in America, the Burma campaign co-ordinated by student college groups against Pepsi Cola because it had a branch in Burma Myanmar. That campaign, among other things, led to Pepsi losing a contract with Harvard University which, although Pepsi does not acknowledge it directly, led them to pull out of Burma. The point about this is that the internet was co-ordinating disparate groups of small numbers who were able to make an effective campaign which had a direct commercial impact.

There is another brief example which is not exactly commercial but does relate to investment. The OECD, as you may be familiar, has been having discussions about the so-called multilateral agreement on investment. It has not yet happened. Why not? Again, it is because of an effective campaign co-ordinated by the internet against this agreement. It may still happen but it has been delayed because of the campaign. The OECD people really do not know where these people are coming from, but they are coming and it is halting these negotiations.

My next group of remarks is about the pace of change. Are these issues a kind of fashion which just comes and goes? Partly yes. There are various factors which are quite difficult to analyse about why some issues come up and not others. But among the factors, organisations, again, just as businesses, go through cycles, so Greenpeace has had its ups and downs. The ups and downs are to do with personalities within the organisation. They may be to do with economic trends, so that when there is a lot of money about people are more encouraged to pay subscriptions to Greenpeace and more concerned about things which might be considered less vital than their jobs. That is the theory.

Other issues are charismatic leaders, both on the home front so to speak but also internationally, for example in Nigeria, Ogoni Land. If there had been no Ken Saro-Wiwa, would we have heard of Ogoni Land in the same way? Possibly not. It is often quite difficult to assess why some trends, why some issues, rather than others. Let me pose the question, rather than the answer: why Burma rather than Nigeria?

My main argument is that this is overall a long term trend, demanding more responsibilities of companies. There may be fluctuations, but the long term trend is up.

Let me give two examples to illustrate what I mean. My great grandfather was a great pillar of the establishment, such a pillar of the establishment that he founded a Lloyd's broking house which lasted about 100 years before it was gobbled up by other Lloyd's broking houses. He was also a member of the Surrey Commons Preservation Society, which was a kind of predecessor to today's conservation groups. Now, I could not imagine my great grandfather being a member of the eco-warriors. Nonetheless, over a long stretch of 100 years, there is a line of descent from my great grandfather to the eco-warriors with variations, illustrating the cumulative pace of change.

I would also like to risk something. This is a new idea and I would like to try it out on you to see if it strikes a cord: universal standards. Let me give you a metaphor, which is another historical one. Until the 19th century, there was no such thing as universal time. There were clocks, clocks in London, clocks in Birmingham, clocks in Market Harborough, but they did not all say the same time. There were clocks in the church tower, and shopkeepers timed their clocks by the church tower, but the clock in the church tower in Birmingham said a different time from the clock here.

Then there had to be standardisation, in particular with the railways, because if railways were going to stick with a timetable it was rather inconvenient if the clocks in Birmingham were half an hour ahead or half an hour behind the London ones. What I am arguing is that, in a broader question of standards, we are in a transition phase. But just as the clock in Birmingham was at a different time to the clock here, so standards in Nigeria, or possibly France, may be different from the standards demanded in America, but the trend is towards universalisation.

Perhaps I had better define that more. The first thing is that we take, as I say, this trend seriously, and we do take non-governmental organisations and US pressure groups seriously. They vary in their responsibility, in the degree that they take a responsible attitude to companies and their issues.They are collectively an important part of society, and if you doubt that, look at a country like Burma or, in the past, Russia where they did not exist and consider what some of the consequences were environmentally, among other things.

So take them seriously. Prepare. Do not wait for trouble. Do not wait for some problem to come up in a country where problems have not yet come up. Think ahead. Train your staff. Don't just have some policy in a drawer in head office. This is something we have learned from experience. It has to be something which the whole staff understands - that standards of corporate responsibility, not only in the environment but also in corruption and human rights, are an integral part of how the company operates. In some cases that demands a cultural shift.

I have said that there is interest in the NGO world and NGO partnership. We should not necessarily be looking for consensus, and an organisation like Oxfam does have a different agenda from a mining company, for example. So one should not expect consensus, but one should expect a dialogue. One should talk to them. One should get to know them, not least so that if there was a crisis then you have a way of communicating when you need to in order to handle the crisis, and there are various ways of co-operation. In the case of the a mining company, the co-operation might be with mining development engineers, for example.

The final point is to stress very much that this is not a one-off. It is all a very dynamic, emerging field. We see this with the mining or the oil and gas companies. Shell has taken the lessons of Brent Spar and going inland very seriously. It is engaged in a dialogue through its internet site, which is very interesting. It is publically making a stand on accountability; it is publishing its social auditing.

But in answering one question a whole new set of questions are coming out. The new set of questions are to do with how you measure accountability, who judges whether you have lived up to the standards you yourself have declared. If you yourself say: "I am living up to my standards" is that good enough or do you have to have some kind of independent auditor, just as you do in the financial field? All this is an emerging, rapidly developing field and you should move with it.

Paul Hopkin: I suppose that the BBC is one of the top 10 best known brand names in the world. I do not think it is arrogant in any way to say that. Different parts of the BBC, of course, would claim responsibility for that and the huge achievement that it probably represents. Therefore, reputation is hugely important to the organisation. What I will do in this brief presentation, is give you an overview of how we are looking at reputational risks and how we intend to carry better management of those reputational risks forward.

I started off, when preparing these notes, by grabbing the dictionary and looking up the word "reputation". In relation to the BBC, I came up with the definition: the generally held opinion of the BBC is its reputation, so I suppose you are thinking about things like excellent value for money and terrific programme output. These sorts of phrases, I am sure, are buzzing round in your head. Or, as Alan Partridge would put it: quality, excellence and originality. That was the way he described the BBC and then used Noel's House Party as an example of quality, excellence and originality. But he is a comedian, after all.

Reputation, when you just come to the word is very abstract, very intangible and difficult to get hold of. So the approach that we have taken in relation to reputational risk, and also in relation to financial risk and infrastructure risks, is to seek to define broad categories that come under the heading. We ask the question at senior level: what are the things that could adversely affect the reputation of the organisation?

In the broad categories that we are focusing on, business interruption is a critical issue. There is an absolute obsession with the continuity of the electrical supply in premises like Broadcasting House and Television Centre. Business disruption, programmes falling off the air, use whatever jargon you will. The blank screen does nothing for the reputation. For commercial outlets of course, blank screens do actually represent lost income. If they are not transmitting advertisements, then they cannot charge their clients for that advertising output. That is not true of the BBC, by and large.

We then focused on statutory and legal responsibilities, as our second broad category. Being prosecuted for failure to comply with legislation is bad publicity for any organisation. In relation to an organisation such as the BBC, governed by Royal Charter, then there is a whole additional set of requirements as well.

Then, of course, programmes and outputs. The quality of programmes is broadly measured by viewing figures and I come back to quality, excellence and originality again as being good descriptors of programme output.

Fair trading. An organisation that is part commercial and part licence fee has to be acutely aware of fair trading and cross-subsidising licence activities with commercial income. Otherwise, competitors in the market place do become very, very upset about it.

Finally, brand protection. Increasingly as you go round the book shelves, you will see the BBC Top of the Pops magazine, the BBC Match of the Day magazine, and these are developments in terms of using the brand name to sell products such as magazines, videos and so on.

So we define broad categories of risk to which you can then start to ascribe ownership. You can then start to say: "Well, now we have got reputation into more tangible issues, we can identify who owns those issues."

I will pursue a little bit further the question of business interruption, the output continuity, and the broad ownership that comes with that. It is possible to define the people who have a part to play in keeping programmes on the air. Programmes are very often played from video tapes. Within Television Centre, there is a section where the programme, which is being broadcast at the time, is being played on a video player. It may not sound quite the high tech, highly sophisticated thing you expect, but that is the source of the material that is broadcast. It is subject to all of the things that your video players are subject to at home: tapes getting jammed, power cuts, people inserting the wrong tape and playing the wrong programme or the tape not being delivered from the archives department. So the broad group of people who have a part to play in broadcast continuity can be defined and the individual categories of risk within that, are quite definable, are very tangible.

Having defined this group of people, we are now looking at the issue of what are the specific risks that we need to manage better or need to continue to manage well. We have started to do this by looking at these risks in terms of the time frame that they could have an impact. We are looking at the risks associated with our electrical power strategy. Our strategy, for example, in Broadcasting House, is based on two independent supplies from the Electricity Board, plus our own generators, plus the biggest battery you have ever seen in your life if all else fails. If we have got our strategy wrong, it may not be felt for some years to come, but there are risks associated with getting that strategy wrong.

On the operational side, there are things like equipment failure. This becomes increasingly important as the technology gets more and more sophisticated. It is still typically the case that where you are playing a programme output from a tape and the tape gets snarled up, you have an engineer come along with a screwdriver. He unscrews the top of the video player, retrieves the tape and, hopefully, you can insert it into another player. When you've got a solid-state record of the programme that you are playing out, then that becomes much more difficult.

Technology is stepping over the CD which you and I will start using in our homes. By and large, that will not be a transmission media. The next stage will be transmission from computer, hard disc type records. And we all know that when the computer refuses to give you your data back. An engineer with a screwdriver is not actually going to do you any good at all. There are different operational issues as the technology advances.

We come up with three headings, reputation being the focus of today, of course, but also finance and infrastructure risks like people, premises and so on. We then ask: what are the individual risk categories within these broad headings and then what are the individual risks?

The intention is then to prioritise this hugely complex list. Looking to my own discipline of risk management, I think where risk managers are needing to develop their own skills at the moment is in the ability to take all these very diverse and very different risks and come up with a priority list that says, in effect, that these are the top 10, the top 20 risks facing the organisation and these are the issues that we will now tackle.

David Gamble, AIRMIC: Paul, you mentioned that reputation at the BBC is generally held to be the public opinion of the BBC.

Paul Hopkin: That is what the dictionary says.

David Gamble: It seems to me, that one of the interesting things about the BBC is that part of your reputation is in actually taking risks with that public opinion. You have got a good case coming up this weekend with a programme on the funeral of Princess Diana which has already caused a furore on the front pages of the Sunday Mirror. The BBC is going ahead with this programme and clearly a number of people don't like this, but it seems to me that part of way the BBC expands its reputation is by taking additional risks. To what extent is that conscious within the BBC?

Paul Hopkin: A very good question, David. The biggest risk, probably, to the organisation is loss of audience share. If that means being innovative, risky or whatever with programme content, then those are the risks that have to be embraced in order to fend off the bigger risk of losing audience share.

That is an answer and no answer, probably. As far as programme content is concerned, we do actually have a very well structured liaison between programme making departments and legal department. The libel and slander issue is one that you would expect us to be very conscious of. And there is a well established protocol for reviewing sensitive programmes before they are broadcast and for training and briefing sessions for the teams who make specific programmes.

Duncan Minty, Mobility Finance Ltd: My company has a reputation in a very restricted market providing contract hire vehicles for disabled people. The most exposure we have had to our reputation from a loss of face viewpoint was engineered by a BBC programme. It caused our chief executive to be under a lot of pressure for a year or two.

I would like perhaps to put a question, looking at the reputation of an organisation which depends for a lot on government support, whether in the very long term one of the roles of the risk manager is to act as if he or she was a non-governmental organisation looking to find out where the two minds are just not meeting. The dialogue is quite separate, but we have found that we just never expected what happened to happen. We never viewed it in that way.

Paul Hopkin: Yes. I believe the developing role of the risk manager should be into that area. I gave you those five broad categories and then went into business interruption in more detail. The last category I mentioned was brand protection. The definition we work to there is damage from products, events and circumstances that could cause adverse comment and publicity on BBC brands. We then brainstormed to ask the question: what are the specific risks under that heading that could arise from incorrect strategic decisions or could arise from operational issues? As head of risk management, I co-ordinated those brainstorming exercises to come up with as broad a list as possible of the individual risks that would represent damage to the brand itself. So, yes, I believe that the developing role for the risk manager should be into those areas.

John Bray: Could I comment on that as well? Among the things that we have been doing in our role as consultants is exactly this: trying to put ourselves into the shoes or feet or computer screens of outsiders looking at a company and thinking where the areas of potential controversy are. It is very difficult. It requires imagination. This is obviously a selling point for a consultant. They have to understand what the company is about, but they give an outside view and I would hope, shift that brainstorming process one step further.

In one particular exercise we, in fact, invented an NGO to attack the company we were consulting for. So there are a lot of things that one can do for that.

Taking the brainstorming further, it would involve an element of scenario planning. What you do in these circumstances? The actual circumstances which arise are probably going to be quite different, but having gone through the exercise, you are better equipped to think the unthinkable and to respond to what actually does happen.

Lee Coppack: I would like now to ask Ian Harrison to talk about the limits of insurability: what can insurance do and how reputation and how brand can be valued.

Ian Harrison: The insurance question. I suppose we had to get around to it at some time. Actually, I would just like to make a riposte to Paul. Reading the paper the other day, I saw a survey by the Independent Television Commission about how viewers perceive the various channels, and he may like to know that BBC1 is viewed as the Queen Victoria channel, which is safe, reliable, stuffy and traditional. I am not sure whether that is a good thing or a bad thing. I guess it goes either way. But it proves our point that reputations are a fairly subjective animal.

Reputation, clearly, is a critical asset and my argument today would be that it is emerging as the critical asset. I think insurance has tended to be trapped in the box of: is it property or is it casualty or is it something which is outside that? By missing the development of reputational risk as an area which needs protecting, the insurance industry and risk managers are missing a major opportunity of tackling a major problem which is emerging in their own corporations.

If we buy our underwear from Marks & Spencers, it is because it is good, it is quality, we trust it. We will pay rather more. They built their reputation up over many years and now defend it vigorously through their quality procedures. They do not want to let that reputation fail in any way. Their acquisitions, their manoeuvres, are governed by whether they add value to their proposition.

Reputation it is generally accepted has a huge economic value. What is the difference between McDonald's burger franchise and a hole in the wall burger franchise? It is the value that McDonald's have added to the marketing proposition. People trust the McDonald's product. An enormous amount of money is spent on protecting it and developing it. There is a huge economic value in that proposition. It is going to grow.

Reputations must be managed. Paul referred to the way that the BBC continue to manage their reputation. I divert slightly by saying that it is not just promotion. One thinks of Gerald Ratner's speech, six/seven years ago, where the Ratner's name for cheap, attractive, cost effective jewellery, was wrecked overnight by his saying to a professional audience that a bit of his product was cheaper than a prawn sandwich and worse quality. In the right context, he was saying that: "I offer a cheap value proposition product." It got to the wrong audience, who said: "Why buy your product when you are telling me it is rubbish?" Ratners as a brand name have disappeared. It is now Signet. Gerald Ratner personally suffered a major career reversal because of that statement.

Reputations have to be managed. Someone has to say: "That can be misinterpreted. In the context that you say this, it is right, but outside that context, will it be misinterpreted?' The answer was clearly yes. I do not think he would have said it again.

Reputations will become more important. They have become more important, that is generally accepted. Why did Nestlé buy Roundtree at five times disclosed net assets? Because they valued the Roundtree brands. What they have done recently is to globalise those brands but also to add the name Nestlé to the product.

I tend to talk quite a lot about the consumer product industry because I see the branding as their way of enhancing their reputation, and I think it actually applies now in service companies as well. One sees Virgin stretching their name across many different services, relying on the Virgin name being the reputation that people trust.

Where does this leave insurers and risk managers? This is my contentious bit. There was an AIRMIC survey recently that said that insurers are failing to respond to the growth of reputational risk insurance. Turn that round for a second and say that, in fact, risk managers generally, with Paul being an honourable exception, have not tended to develop reputational risk defences as part of their job specification. Again, are they trapped in the property/casualty box, saying: "It doesn't fit either one, so it doesn't apply?"

It should be made your responsibility. I worked in the United States and certainly there, risk managers are casting around for new roles and responsibilities, constantly. They have grasped the reputational risk issue with both hands, and one business card at RIMS last year, did have risk and reputation manager on it. This individual thought that this would be the way of the future. The question that he asked himself was: "What keeps me awake at night?" Increasingly, it is damage to reputation rather than losing a building. Contingency planning will help replace a building, but reputation can be harder to repair unless it is handled correctly.

Of course, as an insurer, we have the same question asked of us as well. Do you not have a responsibility to develop products that fit this need as well? I think that the answer is clearly yes, and I think we have clearly failed to do that. We see a shrinking competitive market where rates are flat, where captives are taking more. We have to step in and say: "That is an area that we could develop for insurance," but, going back to this point that reputation is a very subjective animal, accountants have not managed to define what a brand value is yet fully. What is our chance of getting it past our actuaries as a tangible, named value to be put on to an insurance product?

This worry about business risk is ever present. So what is the insurance way forward? I am interested in developing the more sophisticated increased cost of working type of insurance, where a short term fortuitous crisis is being a threat to reputation. We can provide solutions to meet that need. At the other end, there is the alternative risk management, finite blended approach which could work well for long term reputation issues.

Why is this increased cost of working area of insurance developing well? It is developing; it is selling; it is gaining acceptance. I think because it does meet a need where there is an increased recognition of the potential costs. One of the areas that we deal in is the recall insurance where traditionally it has been an add-on product. We found that if you add a service to that product, the risk manager then sees a benefit which will help him.

Perrier is a great example. The failure to manage the perception crisis there, led them to fall from grace as the branded bottled water to having to compete with Buxton and all the other people who came out of the woodwork to steal their market share. Was it related to the incident? Absolutely. It was clearly tied to that incident where the benzene scare was not answered correctly. It went from being the branded water to just another branded water that was taken over by Nestlé.

Another reason why it is developing well is that the insurance products interact very well with the increased awareness of contingency planning. Back to the comment about contingency planning. What if? What happens if I lose my electricity? What happens if my chairman makes a statement that I really don't think will go down well in the media? These are the questions that risk managers need to ask. Look at the examples from the UK bombings. Where would I relocate if a bomb did destroy my premises? Was that a question that risk managers had to ask themselves 10 years ago?

An increased cost of working cover is a way for us to build a business, because it is part of the insurance tradition. Increased cost of working has been part of many insurance policies for many years. It can been seen as part of loss mitigation which has enabled us to develop aspects of the coverage like rehabilitation. Should insurers be paying for the buy-one, get-one free campaign if the product suffers reputational damage? If it saves long term costs, the answer is clearly yes.

This is an area where the access to specialist constants can actually minimise your damage. If an insurance policy can be added to various services, the client, the risk manager, utilises the services at no additional cost, which enables him to pick up and get access to more consultants than he would normally have done.

I would liken it to a breakdown service for your auto insurance. If your car breaks down, you call the number. You would not necessarily know the number. If it is stuck on the back of your insurance policy which is in your glove compartment, then you are more likely to use it. It is a very useful benefit. I see these services, the sophisticated services that are out there, recall, recall analysis, public relations support, call centre technology, all as being valuable services that insurers can add in as part of their package.

What are the problems? There are clearly problems with the area of reputation insurance. The policies we provide are helpful in the short term fortuitous market, but long term, business risk has been managed by the company. One thinks of Yardley, the cosmetics company that has recently ceased trading. Great brand, but they did not manage it going forward in time. Despite their last minute advertising campaign to try and change the image, they did not manage their reputation. I do not think that insurance can really help in the long term management of the business like that.

Reputation damage is most visible in share price movement (which reflects a subjective, short term view of companies), not sales. The products that have been developed tend to be measured by sales drop or sales change. They do not tend to be measured by share price change. Clearly, perception is linked to the share price, and that there is a gap there between what we can offer, measured by sales, while the share price change is how companies see their perception reflected.

Measurement is still a major issue. I go back to my point that if it scares accountants, it is bound to scare the actuaries that we have to show our results to. But I think that is a challenge for us to rise to and develop products that can actually help companies solve a short term reputation crisis.

Lee Coppack: I would like to ask Johann Meeke to draw together some of the ideas the other speakers have been discussing and, perhaps, say something about other forms of risk finance.

Johann Meeke: Just to show I am educated, I will quote from Socrates. He said that as regards your reputation, it is a very previous jewel. Fire, once you have it, is easier to preserve than to rekindle once it is extinguished.

My mother used to say: "Give a dog a reputation of being an early riser and he can sleep all day." I never quite knew why she was talking about a dog, because, as we were a service family, we were never allowed any family pets. But to this day, when my alarm clock goes off at 6 o'clock in the morning, I am still left wondering if I haven't quite reached and matched her expectations.

Recognising that reputation may be intangible in itself, I put forward, does not mean that it cannot be valued, and if it can be identified as we have been doing, and we can measure it, then the elements of helping to manage the risk are starting to fall into place.

I am not going to differentiate between reputations and brands; I do not think it is really important, although there are subtle differences between them. What I think is more important, is to reinforce the point that to a large degree in the modern world, reputation is becoming more important. The reason for that is fairly simple. Living in a more competitive, complex environment, there is a lot more consumer choice out there. The challenge for anybody who is trying to get somebody to buy their service or product, is to differentiate themselves, and brand and reputation is one way to achieve it.

What is also recognised, because it is so important, is where pressure groups can exert more authority. I was also interested in John's point about our universal standards. I am not totally sure that McDonald's is a good example of improved choice in the market or a move towards a universal standard.

I also want to talk about some fallacies in terms of looking at reputation risk. There is an assumption sometimes that this is really about media management. I think the point has been very well made: it is about starting much earlier on in the process to make sure that your product is right, that your processes are right. Once they are right, then hopefully things won't be going wrong. In terms of the media management, trying to pick up the pieces afterwards is just one element of it.

The other fallacy is, indeed, that the media can be managed. I think it is particularly intriguing that we have got a representative from the BBC here. Certainly one of the areas I would like to expand is this element of poacher and gamekeeper. He is an upholder of the reputation, I think was the point that was being made, of the BBC, and to a large extent, media companies also have the ability to destroy reputation. That point was made by the questioner very well.

The terms of the importance of it, I have got a quote from a chairman of, I think it was, McVities, which again this supports the premise that reputation is rapidly becoming the most important asset. He said: "If we lost all of our production facilities, we could rebuild the business. If we lost the brand name, the business would collapse."

We have a very good example recently of a brand being important and even valued, when BMW were regarded as having pulled off a coup when they looked to buy the Rolls Royce brand for £70 million, and they left Volkswagen with a production facility. I think there was a perception then, in fact, that BMW had won in that process.

How do reputation risks arise? There are a number of ways; I will just highlight some of the main ones.

There is one of brand mismanagement, of franchising, perhaps, to an organisation that then doesn't maintain your standards. There is also brand counterfeiting, which we are hearing about a lot at the moment. It can have a weakening effect as well. The debate is taking place about one of the large stores which is selling branded goods at a knocked down price, and there are actions being taken to preserve the brand image because there is a suggestion that it is being diluted as a consequence.

There is also what we tend to think of more commonly, the risk of offending the customer in some way, and others, like a dispute over copyright and issues of that ilk. All these issues have the effect of diluting brands.

Other ones which are quite unusual - and I accept the point about the trends being in the long term, but I get the impression that this is slightly more recent, certainly in my memory - include criticising people because of their salaries and the pay rises they have received. The chairman of British Gas is a good example of that. Again, it has the effect of affecting the brand in the perception of the customer. How you manage all of those risks, I think is a very difficult and very key issue of interest for all of us.

Where can you get it wrong? I think really in the whole process, as I have already mentioned. If you design a product badly, manufacture it badly, advertise it badly, or even, and I think the example that Ian gave was very close to our hearts, speak badly in a public environment.

What can we do about it? I think that is a bit more challenging and it depends on the level of detail one wants to go into. My starting point is to regard reputation as a very important asset, so something needs to be done. Beyond that, I regard it as being capable of being approached in a way that we approach many conventional risks. We try to identify what the causes of damage can be and then to look at the value of that damage, in order to prioritise all those potential exposures. Then we look at the range and spectrum of risk solutions that we have available to us, whether it be risk control in some shape or form through crisis management, or whether it is some form of risk financing, either though conventional insurance or alternatively, risk financial vehicles.

I think that it is important that it is integrated and regarded as part of the contingency plans, but I do stress that it is about the whole life cycle of a product and the everyday activities of a company in its conception of ideas and services.

If an organisation deals with an incident well, the reward is resilience and sometimes an enhanced reputation. One case most of us would think of is British Midland when the managing director immediately after the incident stood up, and he spoke confidently and from the heart to say they would find out what had gone wrong to make things right. I think he came across very well. In theory, it should also help improve profits that sustainability and resilience show through in the market place.

From a risk financing point of view, I am not actually going to dwell on it, but the message that I really want to put across is that if something can be identified and it can be quantified, then the full spectrum of risk treatments is available to you, one of which is risk financing when it goes wrong. Alternative risk vehicles, especially, are becoming so flexible in what they can finance that if you can define your risk and you can measure it, as I think you can with reputation, then to some degree you can have an element of risk financing in place as a safety net.

I accept there is some debate left yet as to the extent to which reputation and brands can be quantified as a value, but we are getting there. RHM quoting its brand in its accounts some years ago was a notable start. The sale of the Rolls Royce name for £70 million shows that accountants, lawyers and businessmen are putting values on reputation and brand.

The burden of maintaining society's standards is shifting from the state to the business, and there is another debate in itself there as to why that is happening with businesses becoming more globalised and, in fact, bigger than some states. If you look at that, Shell recognises that it has got a motive to make profit and it stands by that motive. It also recognises that it has got a parallel need to recognise its responsibilities.

Maybe it is not an issue any more to stress the importance of reputation. It is important, as I said, from a business perspective. It is also sometimes important from a life or death perspective. I often think about my service family background when people query the importance of reputation. I was very fortunate in my youth when we lived abroad, I lived in Hong Kong. The Gurkhas were brought in at that time because of what we termed the Mao Zedong riots, the Cultural Revolution. I have had a tremendous affinity for the Gurkas since then, because as a kid I used to play among the soldiers where they were billeted.

I saw a quote from a Gurkha at the end of the Falklands War. He said quite simply: "We were asked to attack a hill. The Argentineans were at the top of the hill; we were at the bottom. We knew they were at the top and that they were Argentineans. They knew we were at the bottom and that we were Gurkhas. They ran away."

There is a good example of where reputation alone can be extremely powerful. We see it every day and in terms of pricing, we can debate how you value it. There is no uniform method, but there are, perhaps, individual ways. You can take a look at Heinz Beans. People are prepared to pay more for them than other beans, so you have something that you can compare and contrast and that price difference helps as a point towards the value of reputation.

May I finish on that point.

Lee Coppack: Would you now like to put some questions to the speakers.

Philip Hooley, Clyde & Co: John, you said that you saw there was an increasing trend for standards to become common throughout the world. What standards are you referring to in that regard?

John Bray: Environmental, labour and human rights, roughly in that order. The labour movement is a long historical movement, so that is hardly new, but the environment is quite interesting. In the 1960s and 1970s for an oil or gas or mining company, when you went to a country like Nigeria, Equador or Brazil, you conformed to local standards, local and legal requirements, and you thought you had done your job. Now you are, in effect, required by public opinion here to conform to international standards, internationally, whatever the local legal requirement is. There are variations in that actually it does not necessarily apply in every case, but that is the trend.

Another example of where things are shifting is with labour, where something somewhat similar is happening. You face questions about not only whether you as a company are employing child labour, but whether your suppliers are employing child labour. In the last few years it has become, under force of pressure, that you are responsible for anything that you do in your factories with your name outside, but also for the people who stitch your footballs or sew your ties or shirts.

Human rights, I regard as something which is still shifting very much. To differentiate between human rights and labour, I regard labour as comparatively straightforward, not always implemented as to how you treat your labour force but comparatively straightforward. The area which is not straightforward and which is something of a battle ground at the moment, although maybe I shouldn't use that metaphor, is the question about human rights and pariah states.

You as a company are operating in Algeria, Nigeria or Burma and you are doing everything right locally. You are treating people well. You are not polluting rivers. You are operating to good international standards. Are you then all right or do you have some sort of responsibility for what the government does elsewhere, shooting ethnic minorities or whatever? Do you have some responsibility because your profits go to that government? That question has been raised by Amnesty International among others and at the moment, there isn't really an answer to it.

Companies are saying: "No, we do not have responsibility. Business is business; government is government. That's not our affair." But that position is being challenged and so, if I can take that issue as an example, I see that as an emerging universal. I say it is emerging, I do not know how it is going to end up. But I hope it kind of gives you a range of examples.

I say I do not know how it is going to end up, but I will hazard a guess. For oil and gas, there are a limited number of places where you are going to find major new finds and, therefore, oil and gas companies take much larger risks in all sorts of ways to get that oil and gas. Textile companies do not. Textile companies have been pulling out of Burma in droves. So countries which don't live up to standards are going to be marginalised. I do see that as a trend in that industry.

Alan Punter, Aon: Can I direct a question, primarily to Ian Harrison? I think you mentioned that insurance has begun to make a step into reputation protection and financing, but I think you will probably admit, it is rather a small step. Historically, insurance has been rather backward looking about asset replacement. How can we move out of this property/casualty box into, not just revenue replacement, but as you say, to the ultimate goal which is to protect the share price or the balance sheet in some shape or form.

Ian Harrison: I do not know the answer. I have tried to find out. It is a lot to do with the valuation. You can build quite a number of products which basically enable you to help manage a crisis. That is a fairly easy step to make. The real key thing is that the risk managers that I have talked to, at the end of the day want, ideally, to find a policy which will give them a guarantee against the change in value of the company.

Ideally, it is: "Protect my earnings per share on a quarterly basis. That is sort of my goal right now. But on a day-to-day basis, I could understand if you could simply give me the full recompense for the drop in the value of sales because of a crisis event." That is a much more obtainable goal working with forensic accountants to spot the changes and strip out some of the seasonal fluctuations that occur.

I am thinking more along the enhanced recall products that I have been handling and developing. One can certainly work on that from a basis of: these were the sales last year, the crisis happened and these are the sales this year. There is a drop, so we must strip out the seasonal, strip out this, strip out that and you come to a number which you can certainly reimburse through insurance. I liken that to being a bridge and then the final step is the reputational aspects. Can you really find the method by which you can attach a policy to the earnings per share changes, because reputation is subjective? Does that help at all?

Alan Punter: Yes. I think that is the path, but we have got a long way to go to respond fully to the needs of the client.

Ian Harrison: Yes. I think it is partly our goal to sit down with risk managers or companies that see this need very clearly - and generally the consumer product companies come to the fore - and working it through them. If we look back 10 years ago, the market was completely undeveloped. Now it is a $70 million market, mainly US based, in this sort of general area, so that is progress. It is rather like D&O or employment protection. It takes a long time for the idea to take root.

Gerald O'Mahoney, Davies Arnold Cooper: We have experience of being instructed by clients to carry out in-house investigations of working practices contrasting what has happened in Africa and eastern Europe, and main board directors asking very awkward questions of what was the common practice say 5 or 10 years ago. I am now being asked to carry out investigations by modern standards. Those modern standards are being applied to what happened previously, and there has been an increased trend in that particular area.

Lee Coppack: Would any of you like to reply?

Johann Meeke: I think it is just a point well made, it really just reinforces the earlier comment that we are moving towards a globalised standard to some degree. Whatever that might be.

John Bray: I would like to comment about why on the whole this is "a good thing", but it is also a problem. Some of the countries themselves say that they are losing competitive advantage because they are having to impose extra costs. One of the questions about standards is this: Whose standards? Who decides? There is even an argument that it is a kind of western protectionism that we are calling for these higher standards. What you are concerned with, what we are all concerned with, is not so much primarily whether it is right or wrong, but what are the pressures our clients face, and your point endorses the pressure they face.

Mark Baylis, Consultant: It is really a question and also an observation to our friend who suffered at the hands of the BBC. I am a public relations consultant, and I would say that any organisation that is genuinely committed to providing good service or good products, with proper planning, should be able to anticipate any crisis of the nature that you described, either prevent them or, at least, when they occur, control them. But it does require planning well in advance, because if you have not planned, when the crisis happens, it is invariably too late.

A question for Ian. I accept that reputation is exceptionally difficult to measure and events that have apparently damaged an organisation's reputation may not have done so at all, but, I would suggest that it can be done provided you do two things:

You agree in advance what the criteria should be.

Provided you track the reputation continuously so if there is an event, you know what the reputational standing was before the event took place.

You can then measure it afterwards and then hopefully get some agreed measurement as to what extent reputation has been damaged.

Ian Harrison: Point well made. I think it is benchmarking for yourself. Where you were and where do you want to be? Contingency planning is definitely a risk manager's responsibility. What if? What if something happens? What am I going to do to repair the damage? And then finally, testing yourself against the question: would I be able to withstand that kind of incident now?

That is really meat and drink to a risk manager, contingency planning and thinking "what if". And I definitely think adding the measurements, saying where you were and where you will be, is a valid thing to do.

David Clark, Lloyd's Non-Marine Association: It is a question for the panel but mainly directed at Ian. This is, perhaps, an unfair question, but you said earlier on that it is vitally important for the organisation to have some kind of reputation strategy and we all know that it is important for an organisation to manage that. But you are Lloyd's syndicate and also Beazley; what brand do you try and protect? Do you try and protect Beazley or do you try and protect Lloyd's? I just wondered how, as an organisation, you approach your own sort of risk management?

Ian Harrison: For Lloyd's as a society and the syndicates within it is an ongoing dilemma. Every day you underwrite, are you a spokesperson for Lloyd's or a spokesperson for your syndicate? Clearly, you have different goals and different objectives. It is absolutely a specific question for Lloyd's as a society but it is back to the question: who do I seek to represent and whom am I speaking for in this context?

Roger Miller, AIRMIC Express: Could I ask a question about the limits of insurability which seem to me absolutely fascinating here? If I understand you correctly, I think the element of fortuity must be there. The element of the time during which indemnity will be given must also be strictly limited, because loss of reputation could go on for ever in terms of loss of earnings, could it not?

Ian Harrison: Yes.

Roger Miller: Also, perhaps, we have got the question of measurement, quantification and also some very, very fine judgement. Someone might say: "Right we will take a chance with this; this will double the sales." In actual fact, it stops the sales forever. There is a difficult judgmental thing for the insurer, I would think, to put it mildly.

Ian Harrison: Absolutely. We are bumping up against business risk all the time. Companies have to take risks. Back to the point Paul made about reputations - the BBC has to take risks in aggressive programming and yet it wants to maintain the image of being trustworthy.

I am thinking of a discussion with a large German reinsurer who looks at the whole area that Lloyd's has been in the forefront of developing and says that this is entrepreneurial risk. What he meant was business risk, by which he meant it was uninsurable. I think if we say it is uninsurable, then I think we are missing a major opportunity, but you need to be careful. The fortuity is one thing and timing is another. Quite simply, what is important is the way that you believe that most companies are going to manage their risk irrespective of insurance. It is a bedrock principle that you are not going to take risks because you have got insurance. That is an absolute key thing.

Roger Miller: So a form of insurance does currently exist?

Ian Harrison: Yes.

Johann Meeke: I think it is a well made point that the risk and opportunity are the two sides of the one coin. Obviously, when you try and seize an opportunity you are also running some risk in the process and vice versa.

A couple of points have been made which I think are worth expanding upon. The first is to do with measurement of the reputation risk. The other is the extent to which there are financial limits available within the market place to provide some compensation. To me, of course, they are wrapped up together.

There are two main approaches, perhaps, at the moment in dealing with this. One I would consider more conventional, but which is pushing back the limits and that is, taking a risk that may not be insured in a conventional way, trying to define it and providing the lump sum of money which is defined in advance, but to some degree, subjectively arrived at. Nevertheless, because it is done in advance, there is some attempt at objectivity within it. It just provides a lump sum to help with the problem. One good example I can think of for that is a particular company I know, in the event of fatalities, because of the nature of the business it is in, wants a lump sum of money which it can then pump into advertising or the like to try to recover, or try and defend itself against the damage to its reputation it might perceive following that event.

The other and this is, perhaps, I think more getting towards the direction that we think we need to be going. Maybe I should bring in Alan Punter at this stage, if I may. He was quoting to me a very good example a short while ago, where there is a package or a plan in place to protect the share price of an organisation following an incident. Its share price may drop. If it drops below a predefined level, an injection of equity will be pumped into that organisation. The motive for this is really one of protection of franchise and protection of reputation.

Alan Punter: I think Johann is alluding to the so-called Cat-e-Put or catastrophe equity put product that a number of companies in the US have purchased. The motivation, as you said, is not just to replace losses which has been the historic insurance approach, but to say that the value of the company, an insurance company in this case, is its ability to write business going forward. Therefore, it is more important to protect the ratings and to be still writing business post-catastrophe, rather than to recover the losses resulting from that catastrophe.

So the focus, the motivation of that approach, Cat-e-Put, is to say, following a catastrophe, that the company has the option, the right to exercise or not, to draw down a new equity, so that its ratings are preserved and it is still writing business after the catastrophe. One of the virtues is that the equity flows straight to the balance sheet. It by-passes the profit and loss account, so that you do have a dip in earnings, but the rating agencies, which are becoming increasingly important and probably more important in determining the company's ability to write business than pure solvency, still have a favourable view of you. You are still in business; you can still sell the product policies to your client base.

The whole focus is to continue in business as an insurance company, not just to say, we lost $10 we need a new $10 in the profit and loss as a recovery. It is to say: what is important after catastrophe? Is it that we still want to be in business; we still want to be highly rated? So what is important after a loss is the balance sheet, not necessarily the profit and loss account. It is to preserve the franchise, not just to say we want reinsurance recoveries. That is the motivation, and why in that case we are in a way protecting the reputation of an insurance company, which is intimately bound up with its ratings and its need for sufficient capital to write the level of premium required to continue to service its client base.

Lee Coppack: That is all the time we have this morning. I would like to thank you all very much for taking part.

Lee Coppack is editor of the international risk edition of Global Reinsurance and co-editor of Global Reinsurance. E-mail: leecoppack@compuserve.com