Reputational risk has emerged as one of the biggest concerns for investment institutions worldwide, according to a report by the Economist Intelligence Unit sponsored by State Street.

The report also found that asset managers and insurance and pension funds have sharply increased their emphasis on risk since the start of the global financial crisis in 2007, although perceptions of how to manage risk can differ greatly within organisations.

The poll of 297 individuals who work at investment institutions around the world found that reputational risk - the chance that the firm's brand is tarnished - shared the top spot with market risk as the biggest concerns of respondents, with 56.2 per cent selecting either as one of their top three dangers.

The rise of reputational risk may be a reflection of growing awareness that reputation is "the mother of all risks", because most negative events will eventually hit a firm's standing, State Street international chief risk officer David Suetens told The Business Times.

"Reputation, it grows as slow as a tree," Mr Suetens said. "A nice tree takes many years to grow, but to chop down a tree can be done very quickly."

There is some divergence in risk perception between those who own assets, such as sovereign wealth, insurance and pension funds; and those who merely deploy them, like asset managers. While reputational risk was the biggest single concern for asset managers, it was only the third-largest perceived risk for asset owners. For asset owners, market and investment risks ranked higher.

In Asia, only 9 per cent of respondents listed product suitability as an important risk, which the report authors found to be "something of a surprise given widespread mis-selling scandals in the region in the wake of the financial crisis".

The survey showed that firms in general gave more priority to risk, with 78 per cent saying they were very risk-aware in the first quarter of 2013, compared to just 30 per cent in 2007. The "startling" change, as the report described it, was largely the same across regions, even though the financial crisis did not affect the Asia Pacific as much as Europe and the United States.

Mr Suetens said the pressure to manage risk came from both regulators and clients.

"It's here to stay simply because the pressure also from the investors is there these days, not only of the regulators," he said.

But just because people felt that risk was important did not mean that they were on the same page in terms of how to manage it.

Respondents who worked in risk management tended to view counterparty risk and information technology or data risk much higher than their colleagues who worked in other areas. On the flip side, "non-risk function" respondents were more concerned about reputational and investment risk than their risk colleagues.

Mr Suetens acknowledged that some tension between the risk and non-risk functions of a firm was probably healthy, using the analogy of a violin where different strings on the same instrument are tuned differently.

But he stressed that firms with boundary-crossing high-level risk committees appeared to be better at making the different strings play in harmony.

The survey found that companies with senior risk committees tended to rate better in terms of communications about risk, and have better unity within a firm in terms of understanding risk. Asked to rate internal information on risk, 87.1 per cent of respondents whose firms had risk committees rated the quality of information as good, compared to just 62.8 per cent of those whose firms did not have a committee.

"By using common sense, and implementing a senior body to have a good dialogue among the functions, seems to help tremendously in establishing a risk culture and risk awareness," Mr Suetens said.