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  • Adequate Management of Reputational Events

    • RR-3.1.10

      Reputational events may still occur despite stringent risk control measures. As such, banks must develop a systematic and comprehensive approach for managing reputational events. This will allow bank management to be prepared to take proper measures to restore the institution's reputation and minimize any damage caused. The effectiveness of this approach would help reduce the chance of having to deal with a full-blown crisis.

      July 2018

    • RR-3.1.11

      The Islamic bank licensee's approach to manage reputational events must include:

      (a) Crisis management adoption of the key elements of effective crisis management, which includes a crisis management manual, crisis management structure, invocation of crisis management, crisis management process, internal and external communications, and pre-planning for crisis management;
      (b) Adoption of an embedded risk mitigation approach that refers to shaping products, business transactions, special investments, outsourcing arrangements, new product process, restructurings etc., which will assist in mitigating some of the potential concerns of key stakeholders by design;
      (c) Post-event reviews—the Board and senior management must conduct a post-event review to identify any lessons learnt, or problems and weaknesses revealed, from the event in order to take appropriate actions to improve the bank's approach for managing reputational risk; and
      (d) Early warning systems—a banks' implementation of early warning systems will enable them to plan actions in advance for addressing potential threats that are likely to develop into reputational events. Early recognition of impending reputational problems also means that valuable time has been won to facilitate pre-planning for future action.
      July 2018

    • RR-3.1.12

      The early warning systems must also involve developing and monitoring:

      (a) Performance indicators and other indicators reflecting stakeholder confidence, which can provide an estimate of the bank's reputation and keep track of the progress in managing associated risks; and
      (b) Early warning indicators (e.g. a sudden increase in customer complaints, breaches of internal controls, operational errors, system outages, fraudulent incidents and any significant deterioration in other performance indicators) and other triggers or thresholds for management actions, or provide signals to invoke response or contingency plans.
      July 2018