Penn State Scandal Sharpens Focus on Reputational Risk
By Mike Tsikoudakis
As Pennsylvania State University faces litigation alleging the school failed to prevent a former assistant football coach from sexually abusing children, reputational damage is top of mind for risk managers at educational institutions.
When a college’s reputation is damaged, it can adversely affect student recruitment, alumni donations and even federal funding, experts say. Awareness of educational institution reputational risks has been rekindled as Penn State faces unlimited legal liability in civil litigation. The first civil lawsuit was filed Nov. 30 alleging that the university knew of and failed to prevent former assistant football coach Gerald A. Sandusky’s alleged child sexual abuse dating back to the early 1990s (see related story).
While reputational risks have been a major concern for school risk managers for several years, “I think the awareness of reputation risk is certainly heightened” since the Penn State scandal, said Ellen Shew Holland, director of risk management at the University of Denver in Denver. “Something like the scandal at Penn State is a huge risk, and it does concern us,” said Larry Stephens, director of risk management at Indiana University in Bloomington, Ind. “Certainly, Penn State has suffered a hit to their reputation,” he said, noting that any revenue loss tied to reputational damage is difficult to quantify.