Michael D. Moberly September 29, 2009
Company reputation is defined as the perception of the company by the public and it’s various stakeholders, i.e., suppliers, customers, employees, local communities, etc. Company reputational risk then, is a function of a range of triggering events or precipitators (inadvertent or intentional) but, usually adverse, that occur in which particular corporate identity features are targeted or becomes exposed, vulnerable or is revealed that were previously not known i.e., a business practice, behavioral incident, or a characteristic (content) of a product or service manufactured and/or sold to the public.
Company reputation and its attendant risks however, are not the sole province/domain of Fortune 500 types of firms. Rather company reputation and reputational risk is relevant to most all company’s including small, medium enterprises (SME’s) as well as small, medium multinationals (SMM’s) regardless of industry sector or location.
For many companies their reputation literally constitutes the primary source (origin) of their intangible assets which can account for as much as 65+% of a company’s value, sources of revenue, sustainability, and foundations for future growth, expansion, and wealth creation.
Management teams routinely admit however, as respondents did to a Conference Board study, that ownership and responsibility for addressing reputational risks are often fragmented and seldom coordinated within a company and sometimes they’re assumed across a wide range of management teams and/or business unit managers.
And, as is typical in such circustances, a debate has emerged over the most effective way for companies to characterize and ultimately address their reputational risks, i.e., as (a.) a separate and distinct category of risk, or (b.) additional (individual) effects of operational incidents in which certain risks or threats can materialize.
With respect to company reputation risk however, there remain two areas in which relatively little practical (applied) research has evolved, i.e., (1.) who is responsible, and (2.) who should take ownership for a company’s reputational risk which includes its monitoring, stewardship, oversight and executing best practices to address it and mitigate its criticality if/when a risk materializes.
It seems clear that company reputational risk is a genuinely integral element to overall ‘company governance’. For starters this means the board and c-suite must reach consensus about (a.) its definition, (b.) its application and relevance to the company, and (c.) recognizing it as a dynamic, relative, and very valuable intangible asset for a company.
This can be fully achieved though only if a company’s reputational risks are consistently monitored and best practices are in place that, among other things, identify (1.) who owns it, and (2.) who’s responsible for doing something about it. (Adapted by Michael D. Moberly from a report produced by The Conference Boards titled ‘Reputation Risk: A Corporate Governance Perspective’)