For example, the enterprise risk management framework of the Committee of Sponsoring Organizations of the Treadway Commission – the so-called “COSO standard” – does not address reputational risk. Likewise, the Basel capital frameworks exclude reputational risks from regulatory capital requirements.7 Accordingly, the current approach to managing reputational risk is largely reactive rather than proactive.
The need for “rules of the game” seems, if anything, to be greater in a globalised world than in a less integrated world. One of the defining characteristics of globalisation is the importance of scale, as technology drives the optimal business units larger and larger in a number of important areas.