×
E-PAPER ▾

E-paper

Business

Need to guard against reputation risks: SBI

| | New Delhi

Financial organisations ought to guard against reputation risks by a sizeable investment in process thinking and cultural improvements as they can result in huge losses to the institutions, says a SBI report.

Reputation is the perceived impression that stakeholders have about how a company is managing its business processes, said SBI’s ‘Ecowrap’.

It further said that measuring the cost of reputation risk is difficult, in part because it can arise as a secondary consequence of other risks.

One way in which it can be measured is through changes in market capitalisation (M-Cap) of the affected institution, which are well placed to capture the many indirect effects of reputation damage through their reflection of lost future earnings, it said. Recently, the Indian banking industry has faced the biggest fraud so far, of about Rs 13,000 crore.

“Taking change in M-Cap as proxy for reputation risk, we found that post 1-month of the event, the decline in M-Cap is 13.2 times more than the fraud amount. Though, the positive news is that it has recovered fast and post 2-months it is now only 9.2 times of the fraud amount,” said the SBI study.

Such risk management programmes needs to be adequately staffed, apart from sizeable investment in process-thinking and simultaneous development of a process-improvement culture, it said.

“Institutions should view risk management as an institutionalisation of best business practices, so as to anticipate risk events, minimise their impact and profit from it,” it said.  The report also added that the entire loss in M-Cap of Indian banking industry is not only attributed to fraud event.

During the same time, RBI also came up with a new guidelines regarding the restructuring and asset quality. This is reflected in change in BSE Bankex which has declined 4.5 per cent during 1-month, but later recovered substantially after the announcement of monetary policy, it said.

 
 
 
 
 

TOP STORIES

Sunday Edition

View All

K’taka PCC preparing for early LS polls, says State party chief Rao

22 Jul 2018 | PTI | Bengaluru

Expecting early Lok Sabha polls by December, Congress in Karnataka on Saturday said it has begun preparations for the elections that it claimed would instal a "non-BJP" Government at the Centre. In the run-up to the polls, Congress said it has decided to reorganise the party from grassroots to pradesh congress committee level...

Read More

STATE EDITIONS

View All

CM reviews preparation of arrival of Prez

22 Jul 2018 | Staff Reporter | Raipur

Chief Minister Raman Singh reviewed the preparations and programmes on scheduled visit of President Ramnath Kovind to Chhattisgarh with his cabinet colleagues and senior officials at his official residence on Saturday. President is scheduled to visit the State on July 25 and 26 at Dantewada and Bastar (Jagdalpur)...

Read More

Page generated in 0.2035 seconds.