Risk or Reward?

By Dennis Larsen

In a world of shifting reputations, radical transparency and business uncertainty, corporations are held to a higher account: a glimpse into enhanced strategic reputation and risk management. Reputation risk has long been explored by academics, practitioners and professional bodies alike. In the last few years, senior leadership attention towards the topic has increased significantly.

In partnership with the European Association of Communications Directors Working Group on Regulatory and Reputation Risk, we set out to explore new directions in reputation risk and recently conducted a pan-European study on the topic. Unsurprisingly, we found that reputation risk management is considered to be essential and has significantly increased in importance. How it is mitigated and managed varies across organisations, but here are some key, general learnings that are readily applicable:

Risk classification

  • Reputation risk management is an essential management imperative regardless of current levels of reputation strength
  • Reputation risks can arise from operational risks and how they are managed
  • Overall reputation risk and specific reputational risks can be simultaneously quantified, assessed and managed

Internal versus external risks

  • Internal sources of reputation risk cannot be ignored, and will receive much more attention in managing reputation risks in the future
  • Internally, leading firms are getting better at understanding reputation from an employee perspective and building reputation risk resilience across the workforce
  • Good governance, ethical business and compliance have great upside reputation value potential, as well as mitigating factors in reputation risk management

Reputation intelligence

  • As the media and social landscape continues to present complexities for businesses, effective monitoring tools are a necessity for any business
  • As the ways in which we measure reputation become more advanced, ensuring that firms have the capability to analyse this data, and translate it into actionable insights, will be important
  • A combination of quantitative and qualitative research is key, with ongoing, in-depth monitoring of stakeholder expectations and experiences as a business imperative
  • Businesses should not lose sight of internal sources of reputation risk, so due emphasis should be placed on tracking internal reputation

Risk governance

  • There are a number of universal principles on reputation risk protocols and governance standards, including: establishing who is responsible, ensuring adequate reporting and oversight, and considering how it fits into the wider landscape of business risks
  • Having a process for co-operation between the communications function and other business functions on reputation risk is essential
  • Businesses have improved over the last five years at putting reputation risk management procedures in place, but there is still work to be done
  • Effective reputation risk management through effective protocols and governance can ultimately be an important business enabler

Culture

  • Ensuring understanding amongst employees regarding the role they play in reputation risk management, and putting in place the relevant expertise, is a significant part of cultivating an effective risk management culture

Leadership

  • Reputation risk is ultimately a collective responsibility but one that requires strong leadership and accountability at the top
  • The rapidly changing external landscape has made it business critical to have sufficient management awareness and reputation risk management capability in place

You can read the full article here, and please get in touch with us to request a session to share more in-depth results and explore how you can enhance your organisation’s approach to reputation risk management.

Join our upcoming events on this topic in London (19 March), Rotterdam (25 April), Zurich (TBD), Dusseldorf (TBD).

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