Predicting Reputation Risk

Michael D. Moberly     July 26, 2014   ‘A blog where attention span really matters’.

For most companies, there are numerous preludes to reputation risk…

First, let me respectfully suggest that I am hard pressed to identify any company or organization I have engaged in recent years on intangible asset matters, irrespective of industry sector, that I and numerous colleagues could not objectively identify (operationally, transactionally) having numerous requisites – preludes which could potentially manifest as significant and adverse reputation risks if left unacknowledged and unmanaged through neglect rooted in operational unfamiliarity about intangible assets.

The speed which events, acts, and behaviors manifest to become reputation risk…

In most circumstances which I am familiar, the speed which an adverse event, behavior, or act can progress to a reputation risk stage, is speculative at best. But, we can probably agree that most reputation risks are variously dependent on how quickly they are ‘outed’ and find a sympathetic and/or pre-disposed audience where ‘the issue’ resonates and achieves the requisite traction prompting it to rapidly escalate. Of course this is particularly true if such risks manifested in consumer – user death, injury, or adverse health challenges.

Respectfully aside from the above, the speed and trajectory which a particular (reputation) risk may advance is seldom more than a ‘best guesstimate’. In other words, it is dependent on numerous variables and factors, some of which can be favorably mitigated or absorbed, so to speak, while others intensify independently, regardless of the best efforts of risk prevention, mitigation, and management. That said, there is no shortage of company c-suites who naïvely assume that the speed which particular risks evolve to adversely affect a company’s reputation is far longer than what it ultimately is. C-suites would be well advised to recognize there is no conclusive evidence to suggest there are term (time) limits in which some categories-types of reputation risk can materialize and  rightfully exacerbate, just ask General Motors.

Reputation risks’ rear view mirror perspective…

Engaging in a quick scan of public domain articles published in business and academic journals, blogs, government agency oversight reports, and other open source media, one quickly sees there is no shortage of media that are purposed to draw attention to the adverse affects associated with materialized reputation risks, albeit with the benefit of a rear view mirror context.

Identifying and assessing reputation risks in a rear view mirror perspective, is not particularly challenging, as readers know. What I often find missing in such ‘monday morning analysis’ however, are assessments of a company’s desire or ability to distinguish the myriad of acts, behaviors, verbal miscues, or process oversights, etc., which…

  • can achieve the requisite traction, external appeal, and media attention to become full blown reputation risks, and
  • produce quick near and long term adverse effects to the victim company’s economics, competitive advantages, image, goodwill, and of course, reputation.

Too, I find there is no particular challenge to engage in a reverse investigation to reveal reputation risk points of origin and rationales why they intensified.

Realistically, are there any events, acts, or behaviors today which can’t plausibly manifest as reputation risk…?

In discussions with numerous senior executives across industry sectors regarding reputation risk, two routinely raised perspectives that are often framed with an air of rhetorical and contemptuous pessimism are,

  • ‘…it’s difficult to think of any event, act, or behavior, either intentional or inadvertent, discounting legitimate ‘whistleblowers, that exist in today’s increasingly competitive, predatorial, and gotcha business environment, which do not carry the potential to materialize as reputation risks so long as there are purposed, sympathetic, and righteous mediums willing to instantaneously disseminate and dramatize its significance’.
  • ‘…there preconceived agendas and/or motives embedded in open source – social media reporting of business risks which companies have knowingly elected to undertake and assume, but, once a risk materializes, it can simultaneously and adversely affect a company’s economics’, competitive advantages, market share and overall market space presence?

With respect to either of the above I am hard pressed to recall any management team member or executive who doesn’t, in their own nuanced words, respond affirmatively to one or both perspectives.

We just didn’t see it coming, that won’t happen to us…

These are two common refrains I and others routinely hear of which one thing is certain, anecdotally at least, there is ample evidence that numerous potential reputation risk events have been dismissed or overlooked by companies with the time honored, but rear view mirror declaration, ‘we just didn’t see it coming’.

Examining the phenomena of reputation risk through the lens of senior company executives, I sense, as an intangible asset strategist and risk specialist, there is substance to this perspective that’s worthy of study. Certainly, I am not advocating senior executives should adopt a passive or dismissive perspective toward reputation risks that merely meet some subjective criteria for being a potential (reputation) risk.

I do hold the view however, that in numerous instances when reputation risks have materialized, there is absolutely no surprise and are generally self-evident, especially since effective counsel on such matters is readily available.

Wisely though, risks that adversely affect a company’s reputation warrant much more study, because, among other things, it’s certainly no secret that the foundations for reputation risks to emerge and materialize into the public domain are often laid well in advance, perhaps even years of less than optimal stewardship, oversight, and management of specific intangible assets, particularly, intellectual, structural, and relationship capital.

As always, your perspectives and comments are most welcome at [email protected].

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