Banking on trust: managing reputation risk in financial service organizations

In this paper we introduce concepts that build a theoretical notion of reputation risk and establish the need to extend our approach to managing such risk.. The existing literature on reputation risk has tended to be reactive and focus on immediate business threats rather than trying to understand cumulative or constituent processes surrounding trust relationships. We explore the notion of ‘active trust’ as a way of redesigning approaches to the management of risk. Our analysis focuses upon distinctive contemporary issues that illuminate the shifting relationships between financial service organizations and their stakeholders: namely the issues of governance, customer service and staff retention. Although part of the analysis concentrates on controversy and breakdown, risks can also induce opportunities; situations that are often viewed as corrosive may present an occasion for creative management. We suggest that proactive reputation risk policies and practices are needed that extend organizational vision beyond the boundaries of the firm to consider the implications of key societal developments.