The risk of damage to a firm's standing that harms its business. It often follows from operational failures or misconduct.
Where you will meet it
Reputational risk comes up in 6 learning outcome notes across the FRM syllabus.
A few of them:
The Building Blocks of Risk Management FRM Part I · Foundations of risk management
“Under Basel it includes legal risk but excludes strategic and reputational risk.”
Operational Risk FRM Part I · Valuation and risk models
“The Basel definition includes legal risk but excludes strategic and reputational risk.”
Credit Scoring and Retail Credit Risk Management FRM Part II · Credit risk measurement and management
“Funding long fixed-rate mortgages with short deposits creates interest rate and liquidity risk, prepayment changes the cash flows, fraud and process failures create operational risk, and mis-selling or unfair practice creates conduct, legal and reputational risk.”
Introduction to Operational Risk and Resilience FRM Part II · Operational risk and resilience
“The Basel definition includes legal risk and excludes strategic and reputational risk, although those can follow from an operational failure.”
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