Not long ago, creditors, bondholders, and other risk-averse investors considered so-called “sin industries” to be safe havens that were less susceptible to market fluctuations. However, in recent months, we've seen how rapidly society's perceptions of and tolerance for “sin” can change, whether they are problems with an entire industry's business model or with the behavior of a specific company's executives. We've also learned how much economic damage can be caused by angry and disappointed stakeholders as a result of such problems.

We live in an era of cultural climate change and reputational risk tornadoes. Finance professionals who can demonstrate that their companies understand how to mitigate these risks—and who can provide validation of their reputational risk management practices—will find their reward in a lower cost of capital.