In Blog

Reputation damage is costly and that is why so many people and organisations would like to insure it against loss. Unfortunately it cannot be insured because reputation is a behavioural risk; this means that insurers are wary of ‘moral hazard’ in offering any form of cover. It is not simply a matter of substantiating the value of any loss, but the causal determinant of any future loss. Your behaviour can ultimately damage your reputation, so why would any respectable insurer get involved?

Of course it is not quite that simple, your reputation is a construct of how others see you, but their opinions need to be managed so you have responsibility both for your behaviour itself and the expectations among your audiences. Ultimately you cannot insure for a loss you could create yourself, irrespective of whether it is caused accidentally or intentionally.

Countries have reputations and Amnesty International publishes an annual Corruption Index based on the risk of doing business in each of 180 countries. Denmark is top with a score of 87 and Somalia is bottom with a score of 9. The UK lies in twelfth position with a score of 77, while the USA lies twenty third with a score of 69, both well above the average score of 43. However this is based on the 2019 Corruption perception and could change in the light of recent events, which impact reputation for integrity, trustworthiness and reliability as much as for corruption itself.

In the case of the UK, the government is pushing ahead with the Internal Markets bill in flagrant breach of an international treaty. The Commons voted it through and the Lords have so far delayed it. If passed the international reputation of the UK will be damaged. Why is the government prepared to risk this? Because it signed a Brexit treaty in January 2020 which drew the border between the UK and EU down the Irish Sea, a hasty decision it now regrets.  Why the Conservative and Unionist Party agreed to this maritime border is a question for future historians, but reneging on a treaty within a year of signing it doesn’t look very good however you try to justify it. 

In the case of the USA, the election of a new president a week ago has not concluded satisfactorily, at least from the viewpoint of the incumbent. The current president is convinced of electoral fraud, despite international observers finding no evidence. The US attorney general, a Trump appointee, has ordered an unprecedented federal investigation despite no evidence of major fraud. This provoked the Director of the Election Crimes Branch at the Justice department to resign in protest, in response to what many see as a political intervention by the attorney general.

So the international reputation of both the UK and the USA has been damaged by self-inflicted actions. One by a government so determined to ‘Get Brexit done’ that it agreed to an unwise border choice it now wants to dispute. The other done by a president who refuses to accept electoral defeat and will question the integrity of the election process in order to retain power. The eyes of the world determine the reputation of a country and neither of these will have risen by the end of 2020.