How to actively manage reputation risk

Warren Buffet repeats this message to his senior managers every year: “We can afford to lose money — even a lot of money. But we can’t afford to lose reputation — even a shred of reputation.”

Deloitte recently published its 2014 global Reputation@Risk study, in which more than 300 global business executives participated. The main conclusion is that “a company’s reputation should be managed like a priceless asset and protected as if it’s a matter of life and death, because from a business and career perspective, that’s exactly what it is”.

The report suggests that many companies might not be fully aware of their exposure to reputation risk, which is a risk in itself.

Reputation risk is still a strategic business issue

Almost 90 percent of the surveyed executives rate reputation risk as “more important” or “much more important,” and say they are explicitly focusing on reputation risk as a key business challenge. A reputation risk that is not properly managed can quickly escalate into a major strategic crisis.

Is this survey your company’s wake-up call? How can issues and crisis be prevented? How can organisations actively manage reputation risk?Are organisations ready for managing issues with the international financial media?

The report gives an answer to the following key questions:

Who are the most important stakeholders?

Customers are the most important stakeholders for managing reputation risk. Key stakeholders include:

  • customers
  • regulators
  • senior executives
  • employees
  • investors

In a world increasingly influenced by social media and instant global communications, managing customer expectations and perceptions is critical to success.

What drives reputation risk?

Reputation risk is driven by a wide range of business risks:

  • Risks related to ethics and integrity, such as fraud, bribery, and corruption.
  • Security risks, including both physical and cyber breaches,
  • Product and service risks, such as those related to safety, health, and the environment.
  • Third-party relationships, with companies increasingly being held accountable for the actions of their suppliers and vendors.

What are the biggest impact areas of reputational issues?

The biggest impact areas are:

  • revenue
  • loss of brand value
  • regulatory investigations

How can companies actively manage reputation risk?

Companies are investing to improve their capabilities for managing reputation risk, by investing in:

  • technology, such as analytical and brand monitoring tools
  • crisis management and scenario planning

Related Q&A about Crisis Communications

Who’s responsible?

Responsibility for reputation risk resides with:

  • chief executive officer
  • chief risk officer
  • board of directors
  • chief financial officer

Useful quotes from surveyed executives

“The communications area is very proactive.”

“We have a corporate communications area at headquarters and they have communications representatives in the regions and countries. They maintain the monitoring of what is being said, of how we are being perceived, and of course try to promote our positive projects to social responsibility projects. There is someone monitoring social media and all other media proactively.”

“News travels very fast.”

“There’s been a recognition that with the increasing influence of social media and social media sites, as well as activist sites, issues can escalate very quickly.”

If the consequence to the customer is significant, our share price will move.”

“We have several touch points that keep us in tune with the current external thinking.”

“We are constantly talking to analysts and investors who give us feedback on how we are faring vis- à-vis the peer companies and our own potential.”

“There is clearly increasing influence from corporate responsibility issues and ethical issues.”

“We are constantly updating the crisis management team and documenting how we are handling crises so we learn for the next one.”

“To enable effective response and minimise possible losses in case of crisis situations, we have installed local crisis management teams at our main locations, supplemented by regional crisis management teams and a global crisis management team.”

“We have a very proactive way to foresee what risks are going to be.”

“We investigate risks constantly, look at how they are developing, and analyze all of the information we have. We then let decision makers know.

“Our Quality team keeps a close tab on quality of products. It actively addresses consumer complaints.”

We have an active whistle blowing mechanism to ensure that highest standards of integrity as enunciated in our Code of Conduct are maintained in the organisation.”

Related Off the record does not exist

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