Michael D. Moberly July 14, 2009
Safeguarding a company’s reputation is an essential (integral) responsibility for management teams and boards alike whether they oversee Fortune 1000’s or small, medium-size companies. An important first step to effectively, and perhaps permantly, address a company’s reputational risk is for management teams to recognize what precipitated – influenced their perception of such risks. This is important for two reasons. First, successfully and effectively responding to reputation risk events has essentially become a CEO driven act. Second, the design and execution of a reputation risk management policy is seldom as effective or proactive as it could be if the principal’s discount how their initial perceptions of reputation risk were framed and ultimately influence their actions ‘under fire’.
Typically, management team’s perception of risk evolves from one or more of the following, (a.) anecdotal accountings from colleagues, (b.) media reports, or (c.) personal experiences. Similarly, management teams are prone to framing reputation risks to their company as subjective, single events with little consideration given to the equally devastating after shocks that can cascade throughout a company and its external environment. To more effectively mitigate and/or counter such oversights, principal’s would find it useful to reflect on precisely how they perceive (interpret) the various types/categories of reputational risk that can adversely affect their company, i.e., their assessment of…
1. the source/origin of the risk
2. the company’s vulnerability/exposure to reputational risks
3. probability and ease which particular reputational risks can/will actually materialize
4. how a reputation risk can adversely affect their company, i.e., costs and cascading affects
5. the time frame and costs the company will incur relative to reputation recovery initiatives
6. the strength of the company’s existing reputation risk management plan to prevent or mitigate
7. whether reputation risks constitute a security problem, communication problem, or management problem, etc.
In most circumstances, conducting an intangible asset assessment of a company, which includes not only assessing reputational risks, but identifying and assessing each assets’ status, fragility, stability, and sustainability. Most management teams find such an assessment a useful prelude to designing a reputation risk policy. For example, if a company policy to address reputation risks is found to have a ‘crisis management’ orientation rather than a ‘contingency-mitigation planning’ orientation would be an indicator that the company is not monitoring – scanning either their external environment or stakeholders for early warning signs that reputation risks are materializing. Instead, a ‘crisis management’ orientation implies a company is essentially waiting for a reputation risk crisis to occur rather than engaging in a proactive and preventative approach!