Profits today, penalties tomorrow: The real cost of distrust
Roy Morgan CEO Michele Levine here responds to Mark Ritson’s recent Mumbrella opinion piece, in which he referenced Roy Morgan and said “brand trust needs to be taken with a massive dose of salt”.
Levine refutes the idea that if a company is making money, reputation can wait. On the contrary, she says, Australia’s last few years show the opposite: distrust is not a vibe problem; it is a balance‑sheet, boardroom and licence‑to‑operate problem that can make seemingly healthy brands fragile.

Michele Levine
Financial markets price distrust in real time
When distrust erupts, markets react first. Recent Australian and global examples show the materiality is immediate and large:
- Medibank shed about $1.6 billion in market value in the days after its data breach, as investors priced cyber risk, remediation costs and class‑action exposure.
- AMP lost around 80% of its market capitalisation following the Banking Royal Commission, reflecting structural repair costs and a multi‑year trust deficit.
- Facebook saw ~$120 billion erased from its market value in the wake of the Cambridge Analytica scandal, a lesson in how a trust shock can reshape cash‑flow expectations overnight.
- Rio Tinto lost around $4 billion in the weeks following the Juukan Gorge cave destruction, highlighting the capital‑market penalty for governance failure.
- Qantas dropped roughly 30% at its 2023 nadir amid illegal staff‑sacking findings and ‘ghost flight’ allegations, demonstrating that even profitable incumbents are not immune to trust risk.
These are not PR abstractions. They are repricings of risk, future cash flows and cost of capital. Profit can coexist with distrust for a time, but the market imposes a trust tax—via higher discount rates, volatility, and the diversion of cash to remediation rather than growth.
From reputation to existential risk
The most damaging form of distrust is not a bad headline; it is the erosion of social licence—and, in extreme cases, threats to the legal licence itself.
- Telecommunications: Following high‑profile failures, public dissatisfaction quickly morphed into calls for stronger penalties, licence scrutiny and tighter service‑assurance obligations. When governments and regulators are pressed to consider cancellation or suspension of operating rights, the debate has moved well beyond marketing.
- Supermarkets: The national conversation on market power has normalised talk of divestiture powers and even the breakup of major grocers. Whether or not a formal breakup occurs, the signal to boards is clear: distrust can invite structural remedies that permanently change the profit pool.
- Casinos and resources: Australia now has precedents for licences being suspended, reconditioned or placed under special management. These are case studies in how distrust migrates from consumer sentiment to hard law and operational curtailment.
Once social licence is punctured, political actors, unions and civil society coordinate pressure. Boards lose strategic degrees of freedom, and the cost of delay compounds.
The regulator multiplier
Distrust attracts a swarm of regulators—ACCC, ASIC, ACMA and state‑based counterparts—each with different remits but a common signal: repair the harm, prove governance has teeth, and expect monitoring for years. The multiplier effect includes:
- Fines and undertakings that divert cash from innovation into restitution.
- Intrusive oversight that slows decision cycles and increases compliance burden.
- Discovery risk that surfaces additional failures (and costs) as investigations proceed.
Even if an organisation remains profitable during this period, value creation is capped by a widening wedge between headline earnings and trust‑adjusted earnings—the latter recognising provisions, remediation, legal costs and constrained growth options.
Fragility: how distrust changes behaviour
Distrust is asymmetric: it spreads faster than trust accrues, and it changes behaviour long after headlines fade.
- Customer switching: Outages, data breaches and perceived unfairness drive spikes in churn, SIM‑porting and policy lapse—especially now that digital onboarding has stripped friction from switching.
- Price elasticity: Distrusted brands lose pricing power; discounting and points inflation become band‑aids that train consumers to wait for deals.
- Employee flight: High performers avoid reputationally toxic employers, pushing up replacement costs and depressing service quality—fuel for the next scandal.
- Investor scepticism: Fund managers demand a risk premium, shorten holding periods and punish misses more harshly.
- Partner caution: Suppliers and joint‑venture partners insert tighter covenants, warranties and audit rights, raising transaction costs.
The result: brand fragility. A business can report solid earnings yet be one incident away from value destruction because the stakeholder system has turned from promoter to counter‑party.
Why ‘trust’ metrics aren’t enough
Most dashboards track advocacy (e.g., NPS) and sometimes ‘trust’. The risk lives in the negative tail—distrust—which behaves differently. Distrust is sticky, contagious and politically salient. It is also predictive of expensive futures: regulator attention, class actions, churn cascades, key talent attrition and CapEx re‑prioritisation.
Boards need to separate how many people love us from how many are actively hostile and mobilising others. The latter is a better early‑warning for material harm.
A governance‑level response
Executives cannot PR their way out of distrust. They must govern their way out. That means:
- Quantify the downside: Treat distrust as a financial liability. Track a distrust delta that links severity and spread to forecast churn, compliance cost and risk‑adjusted cash flows.
- Measure recovery, not applause: Set a Recovery Rate KPI—how quickly and credibly the organisation repairs harm, compensates customers and closes root causes. Recovery must be auditable and externally verified.
- Rebuild social licence: Move from statements to specific undertakings with deadlines, visible milestones and transparent reporting. Tie senior remuneration to those milestones.
- Design for fairness: Audit products, fees and algorithms for perceived unfairness. If customers would call it a ‘gotcha’, fix it before the ACCC does.
- Own the downside narrative: Communicate with affected stakeholders first, then the market. Admit fault, quantify the fix, and keep talking until the job is demonstrably done.
The uncomfortable truth
A healthy P&L can mask a fragile brand. Distrust does not always kill a company today— but it steadily taxes its future. Markets, regulators and citizens have shortened the distance between reputational harm and material consequence. The next incident will not be judged in isolation; it will be judged against a memory of broken promises and unfinished repairs.
Boards that still see distrust as a marketing problem will learn the hard way that it is a licence, law and liquidity problem. And the only reliable antidote is credible, measurable recovery that restores both social licence and balance‑sheet resilience.