Michael D. Moberly November 5, 2014 ‘A long form blog where attention span really matters’!
‘Houston, we’ve got a problem’! The problem, in my view, is that there are far too many business decision, makers, c-suites, boards, and management teams who persist in framing and seeking resolution to their company’s – businesses’ public persona through conventional public relations lens and not as, in most instances, they should, through a very nuanced and sector specific reputation risk lens.
There seems to be no end to the number of globally operating companies, irrespective of sector, which have taken substantial ‘direct hits’ to their reputation of late. To be sure, reputation risk is certainly not the exclusive domain of Fortune designated firms. And too, there is no indication the number, or the criticality associated with reputation risks will diminish, at least in the near term.
Relevant U.S. Congressional Committees are consistently geared up for investigatory hearings, and yes, numerous have political underliers. That notwithstanding, they all essentially seek answers to the proverbial questions, i.e., who knew what, when did they know it, and what, if anything, did they do about it upon first learning about it’.
Collectively, this should prompt us to ask, and quite correctly so in my judgment…
- are these mere public relations issues which presumably can be adequately managed through various conventional and social media platforms and public statements and presumptively dissipate with no long term detrimental – adverse financial and/or competitive advantage affects?
- or, are adverse acts, events, and/or oversights that materialize, the inevitable outcome of dispersed manufacturing and operational (quality control) failures, which, when they come to light, have a higher probability of manifesting as substantial, long term, and potentially irreversible (semi-permanent) risks to a company’s reputation which conventional public relations initiatives may exacerbate instead of ameliorate.
The intangible asset ‘risk of risks’ is a company’s reputation!
Company reputation is an intangible asset of the first order. So, perhaps it would be useful to say again it an economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, competitiveness, and sustainability lie in or evolve directly from intangible assets, of which reputation is one.
Respectfully, I suspect this economic fact may have prompted The Economist’s Intelligence Unit (EIU) to produce a ‘global risk briefing’ paper titled Reputation: Risk of Risks.
Company reputation is defined (in the Economists’ report) as ‘how a business is perceived by stakeholders, including customers, investors, regulators, the media, and the wider public’. To be sure, a company’s reputation ‘declines when things fall short of expectations’. When not one, but multiple consumers – users expectations are not met by a company’s products or services, then it’s unlikely comprehensive and long term remediation will come through conventional public relation strategies.
Company reputation is a prized and increasingly valuable, yet vulnerable and even sometimes fragile asset which the respondents to the EIU survey agreed by stating that sustaining a positive company reputation is a main concern for the majority of risk managers, ahead of, for example…
- regulatory risk
- human capital risk
- IT network risk
- market risk, and
- credit risk.
It’s fair to say now that company reputation risk has risen to the level of being a fiduciary responsibility (and concern) that extends well beyond senior risk managers to being permanent fixtures on company management team dashboards, i.e., Stone v Ritter.
In most instances, companies would be well advised to acquire a deeper appreciation, clarity, and understanding of the asymmetric nature (elements) of reputation risk which can be summed up as…unsatisfactory (poor) company reputation can rapidly, and often times irreversibly and adversely affect a company economically and competitively, aside from the embarrassing and probing questions that will be inevitably posed by the media Congressional Committee members, especially, those who have constituent(s) who personally suffered due to a company’s obvious absence of understanding and correcting reputational risks in a timely manner.
Preferably, reputation risks are identified, assessed, and remediation is commenced in a manner that meets or exceeds regulatory agency oversight, statutory requirements and before unwitting consumers die or become injured as a consequence.
As always, readers comments are most welcome!