Michael D. Moberly October 22, 2012
I recently had a very stimulating conversation with Dr. Nir Kossovsky, President and CEO of Steel City Re in which we discussed a range of issues related to reputation risk. Admittedly, our discussion merely scratched the surface of Dr. Kossovsky’s expertise in diagnosing, dissecting, and mitigating a company reputation risks.
Kossovsky’s firm (Steel City Re), whether by design is not just another ‘we’ll try to fix the mess a company has created’, i.e., through a conventional public relations lens and actions which invariably try to put a favorable and sometimes repentant spin (through primarily media tools) on even the most egregious events, acts, and/or or behaviors. Instead, Kossovsky applies a combination of hard-to-dispute metrics, common sense, and revealing due diligence to proactively and effectively guide clients to reduce the probability a reputation risk event will occur in the first place.
My discussion with Kossovsky largely focused on how (company) reputation risk in many instances can be summed up with a single word; expectations, i.e., the expectations we (consumers, stakeholders, etc.) hold for a specific company or an entire (industry) sector and the products and/or services it produces, i.e., makes available to consumers.
It’s quite easy to use the commercial (U.S) airlines industry as an example of how many of our ‘expectations’ related to airline functionality and travel have appreciably declined, in recent years, at least in my view. For example when I return from a business trip that involved utilizing commercial air transportation, I am often greeted with the clichéd question, ‘how was your flight’? Today, and for many years, my response to that question is consistently framed in some variation of the following, i.e.; ‘I arrived where I intended to go and returned from where I went and still have my carry on’!
What’s more, my expectations have become even further minimized by suggesting I want the commercial aircraft I fly to remain structurally intact and competently piloted and get me from my departure point to my destination and back in a time frame that reasonably resembles what’s printed on my ticket.
Unfortunately, I have few other expectations which I suspect I am not the only commercial flyer who holds such views, barring of course, those who pay five times as much to fly comfortably in wider seats, arrive refreshed, having dosed well, and having the option of consuming real food and an assortment of beverages throughout their flight.
A reality about economy class commercial air travelers like me, for long distances, there are no options, i.e., bus, rail, and automobile, unless of course one’s time ‘on the road’ is irrelevant. This well understood economic fact would seemingly give rise to higher levels of tolerance to the dwindling number of commercial air providers that is somewhat different from retail sectors where consumers play more direct and immediate roles with ‘x’ times for results compared to the more imperturbable commercial air industry about remediating particular reputational risks, with the exception of course, major catastrophes or rows of seats suddenly coming unhinged.
A time-honored, but still very relevant perspective regarding a company’s reputation, be it commercial air carriers, or other industries, is attributed to various individuals, including Warren Buffet…
…it used to take years of consistent mismanagement, calamities, and/or neglect to destroy a company…today a company, and sometimes its entire sector, can commence a substantial downward (reputation risk) spiral rapidly, if not instantaneously…
But, company reputation degradation is not exclusively due to the ever expanding range of persistent, asymmetric, and global risks, threats, and hazards. Rather, reputation demise is often linked to the speed which unchecked, dismissed, or overlooked risks, etc., can actually materialize, escalate, and cascade throughout an enterprise and reach consumers and stakeholders alike! (Adapted by Michael D. Moberly from remarks of Sir John Bond, Chairman of UK based HSBC)
In my view, reputation risks are somewhat akin to the following statement attributed to Jack Welch which I have adapted, i.e., “…an idea is not necessarily a biotech idea, that’s the wrong view of what an idea is. An idea is an error-free billing system or it’s taking a process that used to require six days to do and getting it done in one day. Companies, Welch claims, can routinely obtain productivity increases if they have the means and culture whereby potential ‘good idea contributors’ can come forward with their ideas percolating to the top…”.
In other words, and quite unfortunately, some ideas, we know, a certain, but unknown percentage, will routinely go unrecognized, un-or under-valued, and ultimately be unceremoniously dismissed, never seeing the ‘light of day’ other than in the mind of the originator through a sense of personal and/or professional pride.
Being no novice to this arena, I am hard pressed to believe that many, if not most (reputational) risks, threats, and/or subpar practices and procedures do not always constitute sudden revelations or events. But, company, or worse, in my view, an entire sector’s reputation can be aggravated, if not experience a substantial ‘nose dive’ that rapidly rises to the level of (national, international) calamity, when it becomes pessimistically embedded, as newly acquired consumer expectation.
The lapses found in a single pharmaceutical compounding firm recently is surely a representative example of putting hundreds if not thousands of patients at risk of contracting, extraordinary and sometime irreversible diseases. Admittedly, I, and I supect a significant percentage of consumers had little, if any prior knowledge of drug compounding centers, which now has manifested as a national crisis and by virtue of it being linked to the deaths of numerous, and no doubt more patients.
According to the Professional Compounding Centers of America, presumably a professional association, compounding is described as ‘the art and science of preparing personalized medications for patients, whereby compounded medications are made from scratch, individual ingredients are mixed together in the exact strength and dosage form required by a patient. This method allows the compounding pharmacist to work with the patient and the prescriber to customize a medication to meet the patient’s specific needs’.
Again, according to the PCCA website, at one time, nearly all prescriptions were compounded, but, with the advent of mass drug manufacturing in the 1950s and ‘60s, compounding rapidly declined. The pharmacist’s role as a preparer of medications quickly changed to that of a dispenser of manufactured dosage forms, and most pharmacists no longer were trained to compound medications. However, the “one-size-fits-all” nature of many mass-produced medications meant that some patients’ needs were not being met, but as modern technology and innovative techniques and research have allowed more pharmacists to customize medications to meet specific patient needs.
With the NECC representing a most poor and unfortunate example of the manifestation of a ‘full blown’ reputational risk, is the highly likely probability that some unknown number of NECC employees (individually) were, politely stated, in various ways, collaborators in the materialization of this substantial and in all likelihood, irreversible reputation risk. Which is my point, company reputation risk prevention and/or mitigation is often times about individual acts and behaviors, and not just those emanating from the c-suite.
Readers, this is a clear example of not just a single compounding firms’ reputational risk, but reputational risk that have clearly cascaded throughout this relatively non-descript sector. I’m quite confident the PCCA has developed, as most professional associations have, specific standards and guidelines describing the proverbial minimums of operation. But, I’m equally confident, even though admittedly, I have not examined these particular standards closely, if experience is a reasonable preditors, they do not include a context of reputation risk. It is surely not the PCCA’s role to police the many independent member compounding facilities operating in the U.S.
I do hold the view however, that the compounding firms’ which have not been linked to the current problem, are now on the reputation risk mitigation fast track!
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