Reputation Risk Resilience

Michael D. Moberly   July 29, 2014   ‘A long form blog where attention span really matters’. 

Reputation risk resilience…

Admittedly, I do not know, other than a mere guesstimate, the number of companies which are current in their continuity, contingency, and resilience planning.  I suspect, based on numerous conversations with company leadership teams who would presumably have an oversight role insofar as initiating and executing such plans, far fewer companies than today’s increasingly predatorial, competitive, and winner-take-all business (transaction) environment warrant, have current plans, in place.

Too, there is no reason to doubt a significant, but admittedly unknown percentage of the plans which are in place, have merged or morphed into web-based policy and procedure ‘manuals’ awaiting resurrection when a ‘reputation risk’ serpent stalkingly emerges from the murky and interconnected environs associated with global business.

A companies reputation is, generally it’s most valuable (intangible) asset…

As an intangible asset strategist and risk specialist, I strongly believe that continuity, contingency, and resilience planning must extend far beyond company’s IT systems, supply chains, and consumer, customer, client services to include the full spectrum (15+ categories) of intangible assets which most companies now produce, possess, utilize, and/or acquire.

The reason, it should not go unnoticed that today, 80+% of most company’s value, sources of revenue and ‘building blocks’ for growth, profitability, and sustainability globally reside in – evolve directly from intangible assets!  Through my lens, that represents a fairly clear (fiduciary) obligation that a company’s key intangibles warrant safeguarding and their value, materiality, and risk consistently monitored.

A beneficial and instructive prelude to company reputation risk resilience…

A beneficial and instructive prelude for any company wishing to achieve the necessary (reputation risk) resilience that’s warranted in today’s go fast, go hard, go global business  (transaction) environment begins by acknowledging the range of questions that will inevitably be asked and debated in c-suites, board rooms, among management team members, employees, on social media platforms and possibly within regulatory – oversight bodies,  once a significant reputation risk materializes.

Examples of inevitable questions when reputation risk materializes …

The questions below are neither company nor event specific, but nevertheless, they are real and they can be framed in various ways and in various contexts to represent dominant (reputation risk) issues for which answers will be sought and demanded one a reputation risk emerges – materializes, e.g.,

  • What is/are the origin(s) of this particular risk?
  • Are the ways which the risk is adversely affecting company reputation describable, measurable, monitorable, and trackable?
  • Can it be ascertained how-when the risk initially materialized to a level of company consciousness?
  • Are there human initiators associated with the risk and if so, are they known?
  • Is there any factual basis to the risk insofar as the manner in which it being characterized by any/all facets, and if so, will that influence the risks’ perpetuation for the near (long) term?
  • Is the risk tangible insofar as requiring the company to ethically make operational and/or design decisions to the targeted product or service?
  • Is the risk measurably gaining in strength, and, if so, how rapidly, why, and are the constituencies distinguishable?
  • Is the depth and breadth of the risk, among consumers, stakeholders, investors, etc., subject to objective qualitative – quantitative measurement and monitoring?
  • Is there a probability this particular, or simultaneous set of risks will subside on their own volition without an official (company) response or intervention?, wishful thinking doesn’t count.
  • Is a formal (company) response and mitigating action required, and ethically and legally being advised?
  • Does this particular reputation risk require a specific (nuanced) response or action that will resonate with the affected – complaining parties?, and, if so, can a response be fashioned to de-escalate further adverse rhetoric that exacerbates the (reputation) risk?

No single best strategy…

Experientially, I am hard pressed to suggest there is a single ‘best’ strategy that delivers answers to these (and myriad other) questions to consistently mitigate the asymmetric elements of reputation risk events due in large part o their distinctive origins and often company specific motivation, therefore any  presumption there is a ‘one size fits all’ approach is poor strategy.

I do believe however, the most effective foundation to induce a recuperative path to a materialized reputation risk starts with having an…

objective, experienced, forward looking, ‘speak truth to power’, and rapid assessment and response mechanisms in place that fit a variety of scenarios, each with the potential to adversely affect  a company’s primary sources of value, revenue, and/or market-sector competitive advantages!

Too, it is here that an intangible asset strategist and risk specialist should be close at hand. After all, effectively preventing or mitigating reputation risk cannot and should not be left exclusively to a counter campaign mounted by a public relations unit which has morphed into reputation risk.

A percentage of company’s that become embroiled in a reputation risk event will find a useful starting point to embarking on a mitigation and recovery strategy, or preferably resolve the risk in its early stages would be well advised to have a clear understanding that their company’s reputation is often comprised of – embedded with multiple and collaborative intangible assets that produce revenue generating competitive advantages which warrant safeguarding.

Not all reputation risks rise to a level of…

Insofar as developing a sound reputation risk resilience plan, it’s necessary to recognize, not all materialized (reputation) risks rise to a level in which life, death, or serious injury to consumers – users will occur, are imminent, or that, for publicly traded firms, stock price and market share will irreversibly decline.  Some reputation risk events emerge initially as merely verbal expressions of displeasure regarding a specific company product or service. often on a social media platform.  However, one need not look further, and I am not so sure this is a particularly distinctive example when derogatory expressions attributed to the former owner of the NBA’s Los Angeles Clippers’ made toward Clipper players themselves to witness the obvious  and initial harm and financial damage which discipated quite rapidly following the teams’ purchase by Steve Balmer.  In other words, while the former Clipper owners’ remarks were vile and racist by any standard, there is no particular reason to believe there will be permanency, due in part to the new NBA Commissioners’ prompt and substantial action.

On the other hand, some risk events may appear almost irrelevant insofar as the potential to adversely affect a company’s reputation, at least initially, because initial assessments find no compelling reason to manufacture an immediate response.  However objective monitoring of such circumstances, with few exceptions, should always be monitored for a period of time.  Absent monitoring,  circumstances can quickly escalate by finding a receptive audience and rapidly encompass large blocks of consumers, stakeholders, and social media platforms in ways that indeed cast disfavor and suspicion on a company’s reputation.

Going inside a c-suite, Craig’s List example…

While I have absolutely no firsthand knowledge, I do believe it’s instructive never-the-less, to speculatively examine, in sort of a case study context, the decision that occurred in September, 2010 by Craig’s List and its ‘adult services’ section.  Initially my thoughts were, this clearly falls into the proverbial ‘no-brainer’ category, or does it?

Again, I pretend to have no insider perspective on this matter, but I am confident there were numerous meetings/discussions in the months preceding the September, 2010 decision as their ‘adult services section’ was emerging as a genuine reputation risk.  I fully suspect, the company’s decision making hierarchy were debating the larger question…’what should we do about our adult services section’, e.g., do we…

  • retain the adult services section as is, and try to muscle through the current backlash, law suits, and reputational risks?
  • retain the adult services section, but tone it down through monitoring and imposition of less provocative parameters, or
  • jettison the entire adult services section immediately, which presumably would remove the accelerant that are influencing the rising levels of reputation risk?

I am confident these and variants of these questions were duly debated among legal counsel, public/media relation providers, reputation risk specialists, and financial advisors each offering their perspectives and prognostications about the outcomes of various courses of action being considered.

The fly on the wall…

Unable to be the proverbial ‘fly on the wall’ to actually witness first hand, these discussions, I’m thinking it’s not rocket science to assume the consensus reached in most of the early meetings, at least up to the September 4th decision to suspend the adult services section, were variously influenced by the economic fact – business reality that Craig’s List adult service section was a consistent revenue generator to the tune, it’s been reported, of $37+ million per year.

Too, I am equally confident that during some of the initial discussions among Craig’s List managerial hierarchy, when the ’what should we do about the adult services section’ question arose, there was at least periodic consensus to ‘ride this risk out’ for as long as was prudent.  I presume the speed, depth, and breadth of the adverse reactions to the adult services section issue were being thoughtfully and thoroughly assessed.  Of course, if that were true, I would be inclined to interpret it as…

….unless and/or until the adverse public reaction rises to some, perhaps pre-determined level, e.g. 15+ state’s attorney general’s filing civil actions and going public with their admonitions, only then would the remaining option of closing down the adult services section be considered prudent and ultimately executed.

Reputation risk management 101 vs. graduate level…

Should such speculation be reasonably close to correct, which I suspect it is, I would be further inclined to characterize Craig’s List response in the context of ‘no decision is a decision’. Ultimately, the situation Craig’s List soon found themselves in, was, pure and simple, ‘company reputation risk management 101‘ versus a graduate or Ph.D level it could have been.

Reputation risk intelligent company culture…

Of course, we must not overlook the reality that if such (adult) services were not in demand, particularly in a semi-anonymous web-based format, ala Craig’s List, it’s likely, from a business perspective, Craig’s List would have made the decision to discontinue that particular offering at the initial hint of problems (i.e., reputation risk) on the horizon or revenues being generated were insufficient to justify its continuation.

If that were the case, it’s likely Craig’s List could have leveraged their decision (to discontinue their adult services section) in a manner that would allow them to reap strategic accolades from their stakeholders and consumers versus being on the receiving end of civil actions from a growing list of detractors, special interest groups, and politicians. Bad timing on the part of Craig’s List, perhaps, but, it’s a good business reason to invest in a ‘reputation risk intelligent company culture’!

21st century version of a ‘wake up’ call…

Reputation glitches, such as the one Craig’s List experienced, duly represent 21st century versions of ‘wake-up calls’ for management teams, c-suites, and boards to closely and objectively examine and monitor how or whether their company culture is…

  • attuned to and observant of reputational risk.
  • genuinely reflects the company’s public behavior, and
  • consistently meets the expectations of its customers, consumers, stakeholders, and clients?

This post was inspired by a paper produced by Deloitte titled ‘The People Side Of Risk Intelligence: Aligning Talent And Risk Management.

As always, reader comments and perspectives are welcome at [email protected]


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