The Monetary Board approved the guidelines on reputational risk management which set out the supervisory expectations for Bangko Sentral ng Pilipinas (BSP)-supervised financial institutions (BSFIs) on the identification, assessment, and management of reputational risks that are commensurate to their size, nature, and complexity of operations, overall risk profile, and systemic importance.
This prudential requirement is part of the BSP’s corporate governance reform agenda to foster good governance and encourage prudent management of risks toward building the resilience of the financial system.
“As the financial sector continues to evolve and face challenges arising from digital disruption and stiffer competition, financial institutions must be increasingly sensitive to, and vigilant in addressing potentially more damaging reputation events,” BSP Governor Benjamin E. Diokno said.
“With the right tools and perspective, financial institutions will be more equipped in preventing and managing reputational threats. If not properly managed, these reputational concerns may lead to financial losses, negative publicity, and loss of stakeholder confidence, any of which could have lasting debilitating impact on the institution,” he added.
Reputational risk is closely interlinked with other risk exposures such as credit, market, liquidity, and operational risks, including those arising from cybersecurity threats and negative information in the social media. Such risks may trigger reputational risk or vice versa. In this respect, the guidelines expect BSFIs to adopt a framework to holistically and actively manage reputational risk across the organization and within the conglomerate or group to which they belong. The roles and responsibilities of personnel across the organization in relation to the implementation of such framework shall be clearly communicated and disseminated.
BSFIs are afforded with flexibility in designing and implementing their reputational risk management function, which may be a stand-alone function or integrated with other risk management functions depending on how reputational risk exposures are being managed. The BSFIs may continue to use their existing measures or consider adopting the tools suggested in the guidance to identify and assess reputational risks relevant to their business and industry.
BSFIs must report to the BSP within five (5) calendar days from its determination of any reputation event, including issues arising within the different social media platforms, that may have an adverse effect on the relevant stakeholders of the BSFI and lead to a full-blown crisis if not responded to in a timely and effective manner. Meanwhile, in cases of operational risk events, major cyber-related incidents and/or disruption of financial services and operations, or liquidity shortfall, BSFIs shall comply with the notification/reporting requirements prescribed under existing regulations.
BSFIs are given one (1) year to fully comply with the guidelines on reputational risk management.
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