Last month’s controversy surrounding a high-profile football tournament financing proposal has highlighted the growing challenge banks face in managing reputational risk amid complex transactions. The dispute emerged when Gianni Infantino, president of football’s governing body Fifa, outlined plans to create a wholly owned subsidiary to oversee the commercial operations of its tournaments, with the intent to sell a 20 percent stake to an investor consortium led by Jboshua Kushnter’s Thrive Eternal. JPMorgan Chase was advising on the fundraising, aiming to value the stake at approximately £4.2 billion.

The announcement triggered significant backlash from multiple regional football confederations, including Uefa, which expressed a loss of confidence in Infantino’s leadership and threatened boycotts. In response to the mounting opposition, Fifa withdrew the proposal. Uefa has reportedly prepared a criminal complaint against Infantino, intensifying the dispute. This episode underscores the broader dilemma investment banks encounter when considering involvement in controversial deals that, while legally sound, may carry substantial reputational risks.

Since the 2008 financial crisis, financial institutions have increasingly focused on reputational risk as a critical factor in approving transactions. Banks recognize that even legally compliant deals can lead to adverse publicity, political challenges, litigation, and regulatory scrutiny, all of which can impose significant financial and managerial costs. To address these concerns, many banks have established reputational risk committees (RRCs) comprising senior executives from banking, legal, compliance, corporate affairs, and other key functions. These committees operate independently from deal teams, tasked with rigorously evaluating whether the institution should associate its name with certain transactions.

Contrary to assumptions, RRCs tend to be cautious and often lean toward rejecting controversial mandates. Members face limited incentives to endorse high-risk deals, as negative outcomes attract criticism rather than praise. Banks are particularly motivated to avoid reputational damage due to the extensive resources required for crisis management and the impact on their broader business.

Securing approval from an RRC typically requires strong backing from senior sponsors within the bank and proactive engagement by the deal’s lead managing director, who must build support before formal consideration. Unlike traditional risk assessments such as credit or market risk, reputational risk is more subjective and difficult to quantify. It often involves unique, case-specific factors and the unpredictable nature of public perception.

Common triggers for reputational scrutiny include allegations of forced labor, environmental violations, money laundering, human rights abuses, sanctions evasion, or corruption. However, evaluating broader public reactions to high-profile commercial enterprises, such as Fifa’s proposed monetization of World Cup rights, presents an additional challenge for these committees.

Some bankers express reluctance to weigh in directly on the social or ethical implications of clients’ activities, viewing it as outside their remit. Yet, financial institutions inherently convey an implicit endorsement when associating their names with deals. This association extends beyond legality, serving as a signal of credibility that clients seek to leverage in the market.

Ultimately, managing reputational risk involves more than fact-finding; it requires anticipating how stakeholders will interpret and respond to a transaction under public scrutiny. Even with comprehensive information, banks cannot fully predict the reputational consequences until after a deal unfolds, illustrating the nuanced and often precarious nature of these decisions in today’s financial landscape.