Managing Reputational Exposures
Benjamin Franklin is credited with saying, “It takes many good deeds to build a reputation, and only one bad one to lose it.”
While a sobering perspective in the 1700s, there is even greater risk in the age of social media and the Internet. Although intangible, reputation can be a valuable asset. And like all assets, it needs to be managed and protected. Following these five steps can help you do so.
- Identify Key Stakeholders
Identifying key stakeholders is critical to understanding what may impact reputational value. Typical stakeholders include: customers, potential customers, employees, prospective employees, regulators, creditors, owners/shareholders, and vendors. Yet not all of these stakeholders are crucial to the brand or reputation of a firm.
For example, in the food and beverage industry, consumers (and prospective consumers) are dominant stakeholders. If they are disappointed, there will be value loss.
In many firms, the responsibility of assessing and managing reputational exposures is not clearly delineated.
- Evaluate Stakeholder Expectations
Consider the following hypothetical situation. I own a fast food chain that is well known for fresh, quality ingredients. My dominant stakeholders are customers and prospective customers. If a widespread and well-published E. coli outbreak is traced back to my restaurants, there is a high probability that my dominant stakeholders will take their business elsewhere.
Depending upon how this crisis is managed, there is a risk that my business might never recover. Compare this with Starbucks’ focus on social responsibility issues, and the social media backlash around their announcement to hire 10,000 Muslim refugees around the world. While some portion of potential customers decided to buy their morning latte somewhere else, this plan resonated with the vast majority of current customers.
- Establish Clear Roles and Accountabilities
In many firms, the responsibility of assessing and managing reputational exposures is not clearly delineated. Reputation is recognized as important with a degree of focus in different parts of the organization, but with little or no coordination.
With significant reputational assets at risk, a member of senior management should be designated with the responsibility to assess reputational exposures, lead coordination among different departments, and develop strategies to improve resilience.
- Plan for Reputational Resilience
Different parts of the organization often focus upon specific stakeholders. Some are better at planning strategies, while others tend to be more reactive. Crisis or catastrophes present challenges, but if robust plans are in place to help companies navigate crises, there are opportunities to enhance reputational value.
- Explore Insurance and Risk Financing Options
The insurance industry is ripe for innovation. There are different kinds of insurance products that can narrowly address risks to reputation. Most are more crisis management in nature, providing expert resources or reimbursement of certain expenses. There are a few more holistic approaches, which can offer advisory services, analytics and some level of risk financing. Captives can provide much needed flexibility in what is currently an immature insurance market.
Conclusion: Reputation can represent a very valuable asset. Crisis should be expected. By planning around these five areas, this asset will not only be protected, but it can be enhanced—even in the face of crisis.