Businesses in the Financial Services sector frequently hit the headlines as a result of a reputation crisis. Scandals surrounding LIBOR, PPI and data breaches (to name just a few) have impacted some of the world’s largest and most respected financial institutions.
The press, customers and other stakeholders are quick to highlight proven or rumoured wrongdoing and unethical behaviour.
Banks and insurers are particularly exposed through:
- being key targets for cyber crime through the vast amount of sensitive data they process and the significant potential financial gains to be had from manipulating computer processes and systems
- operating in such a highly regulated market meaning there is an increased possibility of unlawful activity. The popularity of social media raises further concerns over the level of information posted on sites which could be construed as financial advice
This exposure matters as damage to reputation can impact on:
- the market value of assets being directly linked to perceived reputation. For example, Barclays was fined £290m for attempting to manipulate LIBOR – more than £3bn was wiped off Barclays value as stocks fell by over 15%
- credibility with stakeholders/investors as negative press influences the attractiveness of their investments
- the ability to retain and recruit a strong pool of staff in a competitive market
- the effectiveness of expensive marketing campaigns
- influence with government or regulators when it is clear that unscrupulous activity or events will attract their attention
- consumers moving to rival institutions, particularly when there are added financial incentives for customers to switch providers.
Our Global Financial Services practice is now the largest part of our business, combining over 300 specialist lawyer who work in multi-disciplinary teams where you need them.
News from Out-Law.com
Financial services companies that ‘retweet’ comments on Twitter could find themselves in breach of rules on financial promotions, the Financial Conduct Authority (FCA) has warned.