Explain the following terms relating to compliance in banks: Reputational Risk.

Reputational Risk: 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 itself. 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. Reputational risk is a hidden danger that can pose a threat to the survival of the biggest and best-run companies. It can often wipe out millions or billions of Rupees in market capitalization or potential revenues and can occasionally result in a change at the uppermost levels of management. The biggest problem with reputational risk is that it can literally erupt out of nowhere. Reputational risk can also arise from the actions of errant employees, such as egregious fraud or massive trading losses disclosed by some of the world's biggest financial institutions. In an increasingly globalized environment, reputational risk can arise even in a peripheral region far away from home base. In some instances, reputational risk can be mitigated through prompt damage control measures, which is essential in this age of instant communication and social media networks. In other instances, this risk can be more insidious and last for years. For example, gas and oil companies have been increasingly targeted by activists because of the perceived damage to the environment caused by their extraction activities.