Booklet: Retail Payment Systems Section: Retail Payment Systems Risk Management Subsection: Reputation Risk

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Reputation risk is the risk that negative publicity regarding an institution’s business practices will lead to a loss of revenue or litigation. For retail payment-related systems, reputation risk is linked with customer expectations regarding the delivery of retail payment services, and whether the institution is meeting its regulatory and consumer protection obligations relating to those services. An institution’s reputation, particularly the trust afforded it by customers and counter-parties can be irrevocably tarnished due to perceived or real breaches in its ability to conduct business securely and responsibly. In addition, financial institutions are responsible for risks associated with the activities of third-party service providers with which they contract. For example, deficiencies in security and privacy policies that result in the release of customer information by a service provider may result in reputation damage.

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