Learn in the textbookInternal Control and IT Governance
DefinitionReputation risk (レピュテーションリスク) is the possibility that a company's reputation and credibility fall, hurting its business dealings and results.
ExplanationTriggers include scandals, data leaks and poor handling of accidents, which can lead to lost customers, cancelled business deals and a falling share price. Even when the direct financial loss is small, lost trust usually takes a long time to win back. Preventing fraud and errors through internal control also helps protect a company's reputation.
AnalogyLike a sandcastle, it takes a long time to build and only a moment to collapse.
Memory hookReputation goes back to Latin reputare, "to think over": it is what others think of you, and the risk is that this opinion turns against you.