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The cost of reputational damage when a major accident occurs


The occurrence of a major accident in today’s industry may have several types of direct and indirect consequences. However, the most common techniques of Quantitative Risk Analysis (QRA) mainly focus on direct consequences of an accident on humans and equipment and disregard relatively secondary repercussions, such as damage to the company reputation. This type of consequence may have a serious impact on the company and lead to negative cascading events for the local community, such as the layoff of personnel and the decline of satellite companies. This paper investigates the cost of repu¬tational damage to the industrial company where major accidents have occurred. Such accidents offer excellent natural experimental setups in which one can closely study the cost of reputational damage, an indirect cost of an accident. The reputational cost is measured by the loss in the market value of company Total SA that has experienced major accidents. The analysis covers the accidents occurred in 2001 in Toulouse (France) and in 2005 in Buncefield (UK). Using event study methodology, losses due to the accidents are measured by cumulative abnormal returns (CARs) in the period following the accidents. The results obtained from the study demonstrate that the reputational damage may exceed other economic losses and should be considered a priority for the industry. For this reason, an improvement of current QRA techniques is suggested in order to account for the economic impact of reputational risk


Academic chapter/article/Conference paper




  • Khine Kyaw
  • Nicola Paltrinieri


  • Norwegian University of Science and Technology
  • SINTEF Digital / Software Engineering, Safety and Security




CRC Press


Safety and Reliability of Complex Engineered Systems




4537 - 4544

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