Innovate UK backs law firm to develop reputational risk tool

Newberry: Firms must be able to monitor and measure the impact of ESG-related events

A consortium led by City firm Kennedys has been awarded funding from Innovate UK to develop groundbreaking software able to identify and assess reputational risk.

Kennedys’ Reputation Advisor will be developed to analyse content – from corporate documents to publicly available information – to create a real-time reputational index of any risk relating to an organisation’s corporate citizenship via ESG (environmental, social and governance) practices that impact on a company’s bottom line.

The £1.2m project will be part-funded by £783,000 from Innovate UK’s Smart Grants scheme, which supports research and innovation in business that benefits the economy.

The remainder will be covered by Kennedys and its fellow consortium members: Manchester University, University College London, public affairs and communications consultancy Cicero/amo and risk management consultancy RiskCovered.

Kennedys said that, while reputation risk was broader than ESG mandates, it chose to focus on ESG in the recognition that ESG considerations were “increasingly influential in private and public investment, as well as consumer-spending decisions”.

Sustainable supply chains, carbon footprints, charitable giving and the development of diversity and inclusion metrics are well topics of increased scrutiny by the public and regulators.

Reputation Advisor will develop domain-specific technology able to accurately measure, quantify and track in real-time the ESG-specific reputational index of organisations. It will also model complex interrelationships between organisations and markets in order to measure any reputational risk from third parties.

Deborah Newberry, corporate affairs director at Kennedys, said: “The ongoing ESG momentum is likely to lead to a new chapter of reputational risk insurance.

“I expect to see a market shift in optimising existing products that add on reputational risk, such as D&O and cyber security; or towards initiatives that offer standalone coverage of reputation as a discreet hazard.

“However, insurance alone cannot be the solution. Firms must be able to accurately monitor and measure the impact of ESG-related events as part of an effective risk-management strategy.

“Current systems for building in reputational resilience are limited – largely because the data relied upon is unstructured, uncertain and incomplete. Reputation Advisor will be designed to solve that problem.”

Project director Karim Derrick, product and innovation director at the firm’s spin-off technology company Kennedys IQ, said: “In a world where companies are often accused of greenwashing, Reputation Advisor will also provide robust and transparent evidence of a firm’s genuine green credentials.

“From an insurance perspective, the product will help insurers in their conversations with their own clients to quantify ESG related risk.

“Our technology work builds on that of our academic partners, combined with legal expertise, scaffolding human judgment for improved consistency. The benefits and opportunities are huge.”

As well as corporate clients, it is envisaged that insurers will also benefit in using Reputation Advisor to assist with underwriting policies, adjusting premiums and predicting potential triggers for claims.

Reputation Advisor is the fifth Kennedys initiative to be awarded funding by Innovate UK.

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