Reputation Risk-Case Study- Volkswagen

 Reputation Risk

  • Reputation risk is the potential for negative operational outcomes due to a poor public perception (ESG or otherwise). The three big constituents to watch are customers, regulators, and shareholders

Volkswagen

  • In September 2015, the U.S. Environmental Protection Agency (EPA) announced that Volkswagen (VW) had been unethical in its environmental responsibilities. It violated the ESG ethos by programming the software on its vehicles to only control emissions during regulatory tests.
  • Between 2009 and 2015, this software management affected over 10 million cars worldwide
  • The reputational damage to VW was fast and furious. Its share price was cut by one-third as the scandal unfolded.
  • Volkswagen faced billions of dollars in potential fines on top of decreased sales as consumers responded to the allegations by switching brand loyalty to other vendors.

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