Reputational damage

Reputational damage is the loss to financial capital, social capital and/or market share resulting from damage to a firm's reputation. This is often measured in lost revenue, increased operating, capital or regulatory costs, or destruction of shareholder value. Ethics violations, safety issues, security issues, a lack of sustainability, poor quality, and lack of or unethical innovation can all cause reputational damage if they become known.

Reputational damage can result from an adverse or potentially criminal event, regardless of whether the company is directly responsible for said event, (as was the case of the Chicago Tylenol murders in 1982). Extreme cases may lead to large financial losses or bankruptcy, as per the case of Arthur Andersen.

Reputation is recorded as an intangible asset in a company's financial records. Hence, damage to a firm's reputation has financial repercussions. Minor issues can be amplified by external social processes which lead to even more severe impacts on a firm's position.