Reputation Risks Are Predictable

Michael D. Moberly   October 21, 2014   ‘A long form blog where attention span really matters.’

In most instances, there are numerous preludes to the materialization of reputation risk…

I am hard pressed to recall any company or organization I have engaged on intangible asset matters in recent years, irrespective of industry sector, that most anyone with a modicum of familiarity with ‘reputation risk’ could not have identified at least one probable and substantial (reputation) risk waiting to materialize. Naysayers, for which there are many, often argue that risk in general, and reputation risk in particular are inherent facets of doing business in highly competitive and predatorial global environments.

But, seldom, in my view, do reputation risks inexplicably materialize absent the presence of certain’ risk preludes’ or prerequisites, many of which are recognizable in advance, but dismissed, neglected, or arrogantly characterized as merely being drivers of a competitive company’s culture.

A significant percentage of reputation risks erupt when (a.) certain ‘reputation undermining’ acts, behaviors, events, decisions, or culture are tolerated or encouraged and interact with a company’s operations, its transactions, or strategic planning, or (b.) management teams are unfamiliar with the development of intangible assets of which reputation is one.

The speed and trajectory of reputation risks…

The speed which adverse events, acts, and behaviors can coalesce to become legitimate reputation risks remain somewhat speculative in as much as they are variously dependent on (a.) the time frame in which a materialized risk becomes public knowledge, (b.) the adverse economic and competitive advantage affects the risks are producing, and (c.) whether the risk finds a receptive and pre-disposed audience where the risk resonates and achieves the requisite traction which prompts its escalation. This is particularly relevant when a risk manifests in consumer – user death, injury, or adverse health.

Similarly, the trajectory which a particular (reputation) risk may take is seldom more than a ‘best guesstimate’. In other words, the trajectory of a reputation risk is similarly dependent on numerous variables and factors coalescing in a global business climate in which risk in general are become more asymmetric , multi-faceted, and complex insofar as mitigation or internal absorption is concerned.

It is true that some forms of reputation risk intensify quite independently, irrespective of risk prevention, mitigation, and management initiatives. Unfortunately, there is no shortage of company c-suites who naïvely assume that the speed which some reputation risks materialize and the trajectory those risks may take is longer and more predictable than what it ultimately is.

Management teams and decision makers would be well advised to recognize there are few, if any, term (time) limits in which some types of reputation risk can materialize and  produce costly and quasi-permanent damage, 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.

As readers know, identifying potential – probable reputation risks is not, standing alone, a particularly challenging task. But, merely identifying a potential risk seldom includes the necessary analysis and assessment 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 rapid, near and long term adverse effects to the victim company’s economics, competitive advantages, image, goodwill, and of course, reputation.

Similarly, I find there is no particular challenge to engage in a ‘bomb damage assessment’ or reverse investigation in order to reveal reputation risk consequences. What’s necessary is to recognize and understand the points of origin and rationales why a reputation risk materialized in the first place and why it intensified.

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