The significance of a company’s reputation is well known. Highly reputable businesses attract better talent and can often charge premium prices because they are perceived to offer greater value. Their customers are more loyal and tend to purchase a wider range of products and services. These businesses also enjoy higher price-earnings multiples, stronger market valuations, and lower costs of capital because the market expects them to deliver sustained earnings and future growth.

In today’s economy—where 70% to 80% of market value comes from hard-to-measure intangible assets such as brand equity, intellectual capital, and goodwill—organizations are especially vulnerable to anything that can damage their reputations.