Michael D. Moberly July 13, 2009
Company reputation is defined by the Economists’ Intelligence Unit, Weber Shandwick, and others, as ‘how positively or negatively a business is perceived by the people or entities the company relies on for its success, i.e., customers, investors, regulators, the media, and the wider public’. There’s virtually no argument that reputation is a prized and increasingly valuable intangible asset, but it’s exposure and fragility to a growing mass of asymmetric risks is real, especially if management teams are unfamiliar and/or inexperienced in its stewardship, oversight, management, and monitoring.
In its study, Reputation: Risk of Risks, Economist Intelligence Global Risk Briefing Unit, found that, of 269 senior risk managers interviewed, risk to company reputation represented their chief concern, ahead of other risks such as regulatory, human capital, IT network, market, credit, financing, political, and terrorism risks, etc.
Company reputation has become a dominant and driving source of company value and competitive advantage, which numerous respected sources estimate, among them being Weber Shandwick, 63% of a company’s market value now lies in – evolves from reputation. When that level of company value is directly linked to bundles of intangible assets that collectively comprise ‘reputation’ it clearly suggests that the stewardship, oversight, management, and monitoring of company reputation should not be relegated to I’ll do it when (a.) I have time, (b.) I see my competitors doing it, (c.) my company experiences a reputational crisis, or (d.) regulatory mandates require its valuation and reporting. Rather, ‘reputation management’ should commence immediately and focus on an array of stakeholders which can, and frequently do demand – create attention.
For example, company reputation can decline radidly when a customers’ interaction and/or experience with a company falls short of their expectations. In this regard, those charged with managing, monitoring, and responding to a company’s reputational risks must first bring clarity to three things, (1.) whose interaction/experience, (2.) what experience, and (3.) which expectations. Clarity on these matters, will lead to more timely, effective, and responsive strategies to address company reputational risks particularly in terms of resolving and mitigating!
While protecting/safeguarding a company’s reputation is an increasingly critical fiduciary function, it is also one of the more challenging insofar as, (a.) designing effective practices for constant (reputation) monitoring and measurement, and (2.) proactively, rapidly, and correctly responding to reputation hemorrhaging events. In large part, those challenges are products of the asymmetric nature of risks today which collectively exacerbate reputational risk, i.e., (a.) the 24/7 global media, social networking and communication channels and blogging, (b.) increased scrutiny from global regulatory bodies, and (c.) increasingly transferrable customer loyalty.