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5 Unexpected Ways Reputational Damage Can Hit Businesses

5 Unexpected Ways Reputational Damage Can Hit Businesses

Daniel Washington / October 28th, 2025

Reputation, whether an individual’s or a brand’s, is as fragile as a flower. If not taken tender care of, it can expose businesses to challenges they may have never anticipated.

Even minor glitches can easily translate into major public relations headaches. A 2024 survey illustrated how fast trust can evaporate. Around 43% of organizations lost customers, and 37% faced bad publicity due to cyber-related incidents.

Given how fast-paced the business landscape is, the greatest threats are those you never saw coming. This article will share five unexpected pitfalls of business reputational damage you need to be aware of.

Third-Party App and Software Failures

Which business tools do you use? Be it the CRM, the payment processor, or the various marketing platforms, we’re sure you love them all. As useful as they are, such shiny tools are still technology at its best.

What if your beloved tools were to cause business reputational damage? Here’s a visual idea for you to relate to: Suppose your eCommerce store is having the biggest sale of the year. Website traffic is steadily increasing, and the marketing emails are all out.

Suddenly, your site’s payment gateway decides to take a break. Since customers can’t check out, they take to social media. The next thing you know, comments about the site crashing come flooding in.

Technically, it’s not your fault. However, to your customers? The line between reliability and neglect is getting more blurred by the minute. Along the same lines, a 2024 report found that unplanned downtime costs nearly $400 billion for the top 2000 companies worldwide.

Yes, the big players lose an estimated 9% of their profits. The smaller ones? Well, they suffer a more disproportionate blow due to a lack of backup systems. In case you’re planning to lean on cloud service providers, beware!

Critical cloud service interruptions rose by a shocking 18% in 2024. This made the downtime duration jump by 18.7% compared to 2023. Still confident? Well, remember that your customers will not blame the software vendor. It’s your company that will be their target because you’re all they see.

Prevention Tips

Vet each service provider before you commit.
Avoid putting all your digital eggs in one basket.
Stay transparent with your customers.
Think in terms of backup and have a ‘digital disaster plan’ in place.

Brand Association With Controversial Figures or Platforms

Your reputation isn’t just tied to what you do. Oftentimes, it is also determined by what or who you’re seen with. When you collaborate with influencers or advertise across popular platforms, your brand gets much-needed visibility and credibility.

However, it takes only one misstep by an associated figure to turn the spotlight into a blaze. This is an unexpected way business reputational damage occurs because endorsement/collaboration is assumed to be only positive. Businesses fail to realize that someone else’s scandal or misbehavior can reflect on them.

Imagine sponsoring a viral influencer campaign. Everything seems to be going perfectly until a news cycle reveals that the influencer is involved in a scandal or has given controversial opinions. All of a sudden, the glowing posts you paid for get attached to negative headlines. Your brand may be utterly innocent, yet share in the logo of controversy.

This isn’t limited to individuals. Entire platforms can also become a liability. Imagine running ads on a trending social media platform. Things are going well when news breaks of a social media addiction lawsuit targeting that platform.

Such a class-action litigation does exist, primarily against platforms like Snapchat, Instagram, and Facebook. TruLaw shares details of the allegations, which include intentional addictive design without warning users of potential mental health risks.

Despite no personal or brand-related fault, your campaigns on such platforms may garner criticisms questioning your judgment. Association with the platform alone can influence public perception negatively. Since association is a double-edged sword, you need to partner wisely.

Prevention Tips

Vet all partners thoroughly, looking beyond their follower counts.
Build such flexibility into your contracts that you can withdraw quickly if a partner gets involved in a scandal.
Use social listening tools to monitor all associations actively.
Do not invest too much in a single influencer or platform.

Viral Misinformation or Impersonation

People often like to talk about doppelgangers for fun. Well, if the same happens in business (and it does), be sure the joke will be on you. In other words, you can run the tightest operation in town only to find your brand being roasted online for something it never even did.

Welcome to the nightmare of viral misinformation or impersonation. Despite leading to business reputational damage, many brands never budget for this issue. It can take many forms, including a random X (former Twitter) user claiming your product caused harm. It can also be a fake Instagram page mimicking your account and posting offensive content.

Think about the faux Starbucks coupon fiasco of 2018. It claimed to offer free drinks to specific groups, and even went viral before being debunked. The company had to issue public statements to stop the outrage.

That’s not a thing of the past. Just this year, the deepfake small business owner crisis was uncovered. Across America, scammers are using AI-generated deepfakes and fake social accounts to impersonate small business owners.

Then there is the possibility of fake LinkedIn profiles (although the company has verified 55 million users). This equally undermines the credibility of authentic brands. Don’t wait until you’re left scrambling to reclaim a narrative that isn’t even yours.

Prevention Tips

Ensure all your brand accounts have verification and badges, and clear info.
Use tools like Google Alerts to track brand mentions across platforms.
Build a diverse and loyal customer base that will tackle misinformation.
While addressing false claims, keep it calm and professional.

AI and Automation Errors

Automation was supposed to make things smarter and simpler. However, nothing seems to go as planned with technology, right? It can play the fool anytime, leaving your brand holding the bag in the process.

Automation is indeed the darling of modern efficiency. You can screen job applicants, answer customer queries, and whatnot. When such a technology messes up, it carries the potential of creating business reputational damage in the form of public relations disasters.

Just imagine: A human may miswrite a single email. AI holds the potential to miswrite 1,000 before lunch, hitting “send all” with perfect precision. That’s not even the worst part. AI systems create ‘authoritative’ errors, delivering misinformation and insensitive responses boldly.

A prime example would be the Australian pilates business owner who had her Instagram business account taken down for three weeks. It happened because an automation/AI system at Meta falsely flagged a picture of three dogs as children. The downtime cost her business tremendously, dropping revenue by 75%.

Something similar can happen if AI suddenly decides to post a cheerful “Happy Monday” during a global tragedy. The brand may receive terrible backlash for being tone-deaf and insensitive.

Don’t take it lightly; AI can (and does) misread human tone and nuances. Businesses often assume that technology is reliable and neutral until it turns a regular Monday post into a trending apology thread.

Prevention Tips

Always have a human monitor AI outputs.
Audit your algorithms or training data frequently.
Pause automation during crises or sensitive periods.
Test every automation update before making it live.
Take responsibility for mistakes and clarify how you will prevent future errors.

Environmental and Community Backlash

When the neighborhood turns against you, even the best marketing strategy or product line falls short. Environmental or community backlash is such a villain that your business’s reputation can nosedive faster than you can say “sustainability report.”

Many companies mistake environmental issues as ‘big corporate’ problems. These days, reputation is communal. Just one short marketing video of your store’s plastic packaging is enough to get your business trending for all the wrong reasons.

Years of goodwill go out the window the minute greenwashing or community insensitivity enters the picture. One example would be the 50 high-street fashion brands, including Zara and Primark, accused of turning an African river blue due to chemical dyes.

The Msimbazi River had a pH of 12, strong enough as bleach to burn one’s hands. Now, such insensitivity needs to be exposed. In the process, reputation crumbles in the blink of an eye.

Many businesses continue to treat environmental responsibility as a PR checkbox instead of a reputational time bomb. This is precisely why they feel blindsided when community backlash occurs.

Prevention Tips

Expand operations or change suppliers only after gauging the community impact.
Adopt transparent sustainability measures.
Support local farms, neighborhood clean-ups, and educational programs.
Monitor local conversations, be it Facebook groups or Reddit threads, to understand small concerns.

Business reputation does not collapse overnight. In most cases, it takes years for trust to erode. A small leakage, if ignored, can sink great ships. The same principle applies to the world of business.

The risk is seldom in being caught off guard. It’s more so in not preparing at all. Smart leaders don’t question whether their reputation will be tested (they know it will). They aim to be so ready that their brand is able to pass all reputational tests. Are you doing the same?