20190828 Reputational risk – first it’s one thing, then it’s another and now it’s both.

Wednesday, 28 August, 2019 – 11:54

When I first started working in money laundering risk management in the early 1990s, reputational risk was something that greatly exercised my mind: surely customers would walk away from financial and professional service providers associated with laundering. That didn’t happen.

Something else did.

A different form of reputational risk manifested itself: facts, suspicion, even rumour was passed between regulators who would coordinate (not combine) investigations producing multiple actions both within single countries and in multiple countries.

But that is changing: with the power of the hashtag and the unthinking millions riding bandwagons at the click of a link, social media is creating a fascinating and disturbing change.

Recently, Chinese “netizens” (who, for the most part, have little access to the internet proper and are more likely to be operating via Chinese chat platforms such as Weibo) have created waves of public noise that have resulted in apologies from a number of consumer companies. This month alone, three big brands “apologised” to “China” for causing upset. Each had been accused of some kind of insult against China.

Versace was first. It designed an advertisement for places where it has shops. There were city names and countries, such as “Milan, Italy.” It also said “Hong Kong, Hong Kong.” “China”‘s ‘net blew up. It should be “Hong Kong, China,” said critics. Well, yes. Kind of. First, the correct national postal address for Hong Kong is.. Hong Kong. So there is a difference between that the political “Hong Kong, SAR China.”

But it’s more complicated than that because Hong Kong is made up of lots of districts, one of which is “Hong Kong.” That district has lots of sub-districts which were once individual villages. Therefore Wan Chai (or Wanchai), Hong Kong is correct. Versace has a number of shops across what we might term “Greater Hong Kong” but what it calls its flagship shop is in Central – and Central is in that district that is called “Hong Kong” – that’s even the name of one of its railway stations. Half a world away, it’s as if Versace had put “New York, New York” on its advert. But it didn’t: it put New York, USA (and several other American cities followed by USA.” So it’s clear that the pattern across the advert was City, Country. Then Versace printed the advert on a t-shirt and put it up for sale in China.

Nationalist feeling in China instantly took hold and Versace saw itself subject to huge numbers of calls for its products to be subject to boycott for the insult to China.

It was not the first: a shop brand called Coach made a similar advert and also printed it onto t-shirts but their “fault” was more subtle. Listing places such as “London, England” it listed “Hong Kong” and nothing else. That has also resulted in criticism. And then Givenchy did a “Hong Kong, Hong Kong” t-shirt. There were columns and the design contains the Hong Kong, Hong Kong entry alongside those for a number of Chinese cities e.g. Chengdu, China. The juxtaposition created a stark point, even if the designer wasn’t trying to make a point.

All three companies have apologised, saying something like they deeply care for the feelings of “the Chinese people.”