Reputational risk is a threat or danger to the good name or standing of a business or entity. Reputational risk can occur in the following ways:

• Directly, as the result of the actions of the company
• Indirectly, due to the actions of an employee or employees
• Tangentially, through other peripheral parties, such as joint venture partners or suppliers

In addition to having good governance practices and transparency, companies need to be socially responsible and environmentally conscious to avoid or minimize reputational risk.