Dani Ettridge
Locally, sponsors of Oscar Pistorius – Nike and Oakley – pulled their advertising and outdoor billboard campaigns featuring the athlete, while M-Net immediately pulled their TV commercials as news of the shooting and killing of Reeva Steenkamp broke.
“The risks for any sponsor associated with this type of negative publicity are significant both reputationally and financially, and can result in the pulling of multi-million Rand advertising and sponsorship contracts. In many instances the sponsor will need to recreate its entire advertising campaign, even the products on shelves if the packaging or merchandise bears their image or endorsement, costing millions in lost production, merchandise and packaging costs, as well as any remedial action required to protect their reputation,” explains Dani.
The primary reputational risk is that the inappropriate behavior is seen by the public as a direct reflection of the brand’s values and sentiments. This is why such cases demand swift and strategic action on the part of the brand to firstly distance themselves from the unsavoury behavior, but also to publicly make a statement about what their values are and limit further damage by association. Companies are increasingly turning to insurance and risk management to mitigate against these risks and aligning their insurance cover and their contracts with the celebrity endorser accordingly.
Policies are available from various insurance carriers and are structured to cover certain costs, from the removal all advertising material and creating an entirely new campaign, through to the product recall of any items bearing the celebrity’s name or image, as well as the recreation of any packaging and merchandising that needs to be removed and replaced. It is also not possible to insure against a drop in sales revenue as a result of the death or disgrace of a celebrity, because it is very challenging to accurately quantify the direct monetary loss associated with an endorsement.
“When contemplating a celebrity endorsement, it’s highly advisable for brand owners to consult with a specialist risk advisor who can guide them through the process of assessing all the potential risks. This involves analysing every conceivable “what if” scenario, assessing the financial and reputational ramifications and the costs of any required remedial actions, assessing what risks can be avoided by transferring them contractually to the sponsored individual, which ones should be insured and which ones should be retained.
Demand for death, disability and disgrace cover has increased, driven by recent high profile cases as well as the fact that organisations are becoming more sensitive about managing their reputations in the age of the internet. Properly scoped insurance covers guided by the professional advice and risk mitigation skills of an experienced broker are essential to ensure that when celebrities are caught doing something they probably shouldn’t, sponsoring brands can recover and return to normal business operations as soon as possible,” concludes Dani
