22% of consumers say they would leave a financial institution if an employee was the center of a scandal, such as sexual harassment or fraud
ATLANTA, Nov. 16, 2020 – York Public Relations, the nation’s only crisis PR firm dedicated exclusively to mitigating crises for financial institutions and fintechs, today revealed that nearly one-quarter (22%) of U.S. consumers would end a relationship with a financial institution if an employee was involved in an organizational misdeed, such as a sexual harassment scandal or fraud. The survey was conducted online by The Harris Poll on behalf of York Public Relations, garnering responses from 2,053 U.S. adults age 18 and older.
According to the findings, younger consumers tend to be more turned off by organizational misdeeds with 26% each of Gen Z (ages 18-26) and Millennials (ages 24-39) that would break up with their financial institution, compared to Boomers at 16%.
In addition to the reputational damage and potential customer retention challenges, scandals that result in lawsuits can be costly. According to one law firm, employment lawsuits, which include sexual harassment claims, cost organizations an average of $200,000, with $80,000 towards the employer’s attorneys’ fees, $80,000 for the employee’s attorneys’ fees and $40,000 in a settlement to the employee.
Additionally, approximately 10% of discrimination and wrongful termination cases result in a $1 million settlement. Litigation costs are also rising, with some estimates as high as a 9% increase each year. Add to this the fact that most courts rule in favor of the employee, the damage can be extraordinarily expensive.
Beyond harassment cases, organizations that had COVID outbreaks are also now facing legal threats from claims that employees contracted the virus and then spread it to family members, similar to asbestos litigation. According to a report from Praedicat, a firm that evaluates risks for insurers, between 7% and 9% of the U.S. COVID deaths so far are believed to stem from take-home infections. This means lawsuits could cost organizations up to $21 billion. However, similar with other issues, the reputational damage from these claims could also prove detrimental for organizations.
“Scandals and misdeeds can be damaging for financial institutions,” said Mary York, CEO of York Public Relations. “Even if the bad behavior was done by a single, rogue employee and that employee is fired, the burden falls on the institution to rectify any wrongdoing. Additionally, the financial institution is the one at risk of a tarnished reputation, which we now know could cause almost a quarter of accountholders to leave.”
York continued, “Clearly, crisis preparedness is absolutely critical to ensure the right communication is delivered to not just customers or members, but to employees and the community.”