How to Anticipate Reputational Risk in ESG

The world’s rapid progress in COVID-19 vaccination is leading to a strong recovery in both consumer and investor expectations (for example, the IBEX 35 index has risen 13% in the last six months), as well as a climate of confidence in a swift economic recovery in Spain.

The Consumer Confidence Index rose 11.2 points in May compared to previous months, now standing higher than in July 2019. The current situation’s rating has also improved, rising to 62.4 points – 14 points higher than in April. 

The widespread increase in confidence across all sectors is good news for the economy. However, this boom in expectations, coming after the 18-month depression caused by the pandemic, has an inverse effect on reputational risks for companies. The logic is simple: A strong increase in confidence, such as what is happening now, is followed by a strong increase in reputational risk unless the public’s expectations are satisfied. The higher these expectations are, the higher the possibility of failing to meet them as months go by.

The market clearly needs everything to go well; there is a collective desire to believe the economic recovery will take place quickly. Communications and messages to the Spanish market are very consistent in all areas. However, the public’s expectations may be excessive. As Chair of Banco Santander Ana Botin recently said, “We will go off of the charts” in 2021, with growth forecast at 8- 9%. The question, warns Botin, will be, “And what will happen next year?”



Juan Cardona
Jorge Tolsá