Michael D. Moberly   July 27, 2014   ‘A long form blog where attention span really matters.’

Value of company reputation…

I suspect there is agreement that no reasonable executive or management team member would question today the value associated with – attached to their company’s reputation, i.e., its image, goodwill, and the relationship capital it has built. Consequently, as born out in numerous studies, surveys, and published papers that address various facets of reputation risk this is a category of intangible asset which has ratcheted up considerably on c-suites attention and ‘to do’ lists.

Reputation is an intangible asset…

Of course, a company’s reputation is one of multiple intangible assets which consistently play increasingly critical roles in company’s ability to achieve their intended revenue, profitability, and sustainability objectives.  After all, it is an economic fact that today, 80+% of most company’s value and sources of revenue lie in or evolve directly from intangible assets, which reputation is certainly one.

Once a company’s reputation has become tarnished, undermined, or been the subject of warranted scrutiny, sometimes, regardless of the reason, whether it be successive managerial missteps, one-off process glitches, or patterns of unethical behavior and neglect, returning to some semblance of reputational normalcy will, in most instances, be costly, lengthy, and require a well purposed and enterprise wide effort.

Reputation risk intelligent company culture…

Well purposed initiatives which a company’s management team and board may undertake to return their company to itsprevious or perhaps a higher state of reputational normalcy following the materialization of a reputation risk, despite having thoroughly vetted contingency plans in place, may be for naught, if the groundwork and foundations for a viable ‘reputation risk intelligent company culture’ have been overlooked.

It’s certainly reasonable to assume that increases in respondents’ affirmative admissions in surveys regarding reputation risk have been variously influenced by the very public and often self-inflicted calamities experienced by BP, Massey Energy, Craig’s List, McDonalds’ China, General Motors, and numerous others that have been on the receiving end of stakeholder, consumer, and regulatory agency ire.

Of course we know in some instances, consumer ill-will can be relatively short-lived, that is, a materialized reputation risk simply does not resonate or come to be on broad numbers of consumers’ radar screens. That’s not to suggest a company’s reputation can quickly ‘bounce back’, instead, it’s probably a case where a ‘tipping point’, for whatever reason, has not materialized in the media and/or actions of consumers in sufficient numbers to render it an action item on c-suite agendas..   That said however, one need not look far to see evidence in which consumer ill-will is much longer lived, to the point it rises to irreversible permanence which appears particularly relevant in the consumer products and consumables arena.

Too, for publicly traded companies, materialized reputation risks frequently manifest as downward spikes in stock price which translates to overall losses in company value.

Reputation risk is not limited by industry sector…

The current state of (company) reputational risk is not entirely an expectation of companies that operate in what may classify as high or low risk sectors, i.e., baby foods, drilling in the Gulf of Mexico, or coal mining compared to say graphics arts firms, libraries, or flower shops for example.  Nor is it necessarily due to the reality that risk events can expand and exacerbate so rapidly today.

Some companies get what they deserve…

Let there be no doubt, some companies get precisely what they deserve in terms of being on the receiving end of a reputation risk event or act that implodes.  That is, if or when there is a clear incident or pattern of knowingly engaging in risky behaviors or giving only lip service to regulatory mandates and risk management oversight, be it on the high seas, a coal mine, a chicken processing plant, or a manufacturer of toothpaste, all reasonable and legal efforts should be mounted against them to make things whole, if that’s possible for the victims and/or complainants.

Reputation risk attributed to the absence of risk intelligent company culture…

Today, in my view, it’s essential to recognize that the materialization of some (types of) reputation risk can be attributed to the absence of a ‘company culture’ that understands…

• the relevance and potential (enterprise wide) adverse and potentially long term impact to a company’s reputation when certain risks materialize, and
• how such risks can reverberate through global media platforms and find resonance (tipping points) among large blocks of consumers and stakeholders.
• this prompts a defense only response path.

Horizontal reputation risk monitoring and assessment…

A company’s reaction to a potential – probable reputation risk, relative to the speed which it can materialize, can be particularly acute for companies which have no advance ‘horizontal monitoring and assessment’ procedures in place to…

• provide timely, regular, and objective insights and updates about where and how a risk emanated and commenced.
• reach internal consensus for executing an effective and appropriately timed response of some type, which I believe is more frequently than not, warranted.

A ‘reputation risk intelligent company culture’ can be an effective and complimentary path that will deliver returns far greater than the alternative!

As always, I welcome readers’ comments and perspectives at [email protected].