The £1.2 million project, Reputation Advisor, will be part-funded by £783,000 from Innovate UK’s Smart Grants scheme, which supports research and innovation in business that benefits the economy.

The remainder will be covered by Kennedys and its fellow consortium members: the University of Manchester, University College London, Cicero/amo and RiskCovered Limited.

While reputation risk is broader than ESG (environmental, social and governance) mandates, Kennedys has chosen to focus on ESG in the recognition that ESG considerations are increasingly influential in private and public investment, as well as consumer-spending decisions.

Sustainable supply chains, carbon footprints, charitable giving and the development of diversity and inclusion metrics are all topics of increased scrutiny by the public and regulators.

Reputation risk is considered as an intangible asset that is rising in company value. According to a joint Lloyd’s of London/KPMG report, the importance of intangible assets has grown to more than 85 per cent of asset value, with reputation and brand identified as the most important. If triggered, the risk can result in huge financial losses such as those suffered by Facebook in 2018 when its stock plummeted following a massive data breach and privacy scandal.

Data from Allianz suggests that firms who fail to properly prepare for events that may damage their reputation could see their value slashed by as much as 30 per cent.

Deborah Newberry, corporate affairs director at Kennedys, said: “The ongoing ESG momentum is likely to lead to a new chapter of reputational risk insurance. I expect to see a market shift in optimising existing products that add on reputational risk, such as D&O and cyber security; or towards initiatives that offer standalone coverage of reputation as a discreet hazard.

“However, insurance alone cannot be the solution. Firms must be able to accurately monitor and measure the impact of ESG-related events as part of an effective risk-management strategy. Current systems for building in reputational resilience are limited – largely because the data relied upon is unstructured, uncertain and incomplete.

“Reputation Advisor will be designed to solve that problem, for the first time giving businesses the tools to accurately measure their ESG rating and proactively develop strategies to manage their sustainable reputation going forward.”