Understanding Reputation Risk: Part IV
By Leonard J. Ponzi, Ph.D. - Managing Partner, ReputationInc & Andrea Bonime-Blanc, JD/Ph.D. - CEO and Founder, GEC Risk Advisory
“A reputation once broken may possibly be repaired, but the world will always keep their eyes on the spot where the crack was.”
Joseph Hall English Bishop and satirist (1574-1656)
The purpose of this series has been to describe the elements of a robust reputation risk management program with an enhancement to the quantitative framework for visualizing an organization’s reputation risks. Visualization provides a key input into developing the strategy and tactics of addressing each risk. In this Part IV of V, we add to the quantitative toolbox of our approach to reputation risk.
We started our series on reputation risk in Part I, where we provided a brief introduction to this relatively new concept and distinguished it from related concepts, like crisis management. And in Part II, we made the case that reputation risk management should be part of the strategic agenda and that every type of organization – whether corporation, non-profit or government agency -- should know who their most important stakeholders are, as stakeholders are a vital part of any reputation risk management solution.
We will conclude with Part V (coming soon) where we will pull it all together – the qualitative and quantitative aspects of reputation risk management – and apply it to several mini-case studies which we hope our readers will find useful and maybe even inspiring.
Our approach is different from what we have seen before because our philosophy is that successful reputation risk management requires a mix of art and science, quality and quantity, the objective and the subjective.
In Parts I and II of this series, we suggested that current approaches are mainly qualitative in nature. More specifically, in the “Risk Analysis” phase of risk management, inputs on the “likelihood” and “impact” of an event are determined mainly by an expert committee of insiders. Although it can be a highly qualified and insightful committee, its view will be by definition more “art” than “science” as it is the view of insiders who by virtue of where they are situated within their company can only provide an insider perspective.It is not that we think that there is perfection to the “science” part of this equation – quite to the contrary, we fully acknowledge that the quantitative part of our approach to reputation risk will also have its flaws as everything carries a mix of objective and subjective elements. What we are saying, however, is that because of the inherently complex, ever-changing and intangible nature of reputation risk, to be as highly effective as possible, both the “quant” and “qual” sides need to be robustly taken into account and applied.
In this Part IV, we propose two supporting analyses aimed at enhancing the current methodology with some science by addressing two key questions, namely:
- What is the Total Value of Reputation Risk to Your Company?
- For each reputation risk, what is its reputation value?
For the full report, you can find the download links on the right-hand side