A company's reputation is invaluable to its future, and risk managers need to become more involved in understanding and managing that risk, said an insurance broker.

Speaking today during the Marsh insurance brokerage seminar series "The New Reality of Risk," Larry Walsh, senior vice president with Marsh's Reputational Risk and Crisis Management practice, said managing reputation risk is not simply about crisis management of a single incident but identifying a problem and controlling it from spiraling into a worse crisis.

Few risk managers understand a company's reputational risk, and they need to in order to help manage it effectively, he pointed out.

"It is not just a question about protecting the company's reputation but asking, 'Are we doing enough to manage our reputational risk?'" said Mr. Walsh.

Reputational risk is well understood by company chief executives who often identify their firm's reputation as an intangible asset on its balance sheet. For that reason, risk managers should be equally adept at identifying the company's reputation and protecting it, he said.

Mr. Walsh said risk managers should first ask what does their company's brand stand for. Understanding this means talking with different departments within the company to understand how they view the brand. Next, he advised, they should talk to the stakeholders, customers, business partners, distributors and others to get their feedback about the brand and its reputation.

Once a risk manager understands how the brand is perceived, Mr. Walsh said, a manager can then get his hands around the risk, manage it, and turn risk into opportunity when recovering from adverse events.

Companies that develop a negative reputation can see damage to the business through sales and recruitment, he said.

"When faced with crisis or difficulties, take that first step, define what the message is that you want, and don't wait to respond to detractors or the competition because they will have filled in any dead air space," advised Mr. Walsh, adding risk managers need to move quickly to mitigate the problem.

"It's you and not your detractors who need to define the debate here," he added. "You need to be aggressive in managing your reputation over the long term."

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