Welcome » IT Booklets » Retail Payment Systems » Retail Payment Systems Risk Management » Reputation Risk
Reputation risk occurs when negative publicity regarding an
institution's business practices leads to a loss of revenue or
litigation. For retail payment-related systems, reputation
risk is linked to consumer expectations regarding the delivery of
retail payment services, and the institution's ability to meet its
regulatory and consumer protection obligations related to those
services. An institution's reputation, particularly the trust
afforded it by customers and counterparties can be irrevocably
tarnished due to perceived or real breaches in its ability to
conduct business securely and responsibly.
Financial institutions are responsible for risks associated with
the activities of third-party service providers with which they
contract. Deficiencies in security and privacy policies that
result in the release of customer information by a service provider
can damage the reputation of client financial institutions.
Operational failures could significantly impact an institution's
reputation if systems are disrupted for extended periods.
Management oversight of third-party service providers is a critical
component of reputation risk management.