Managing Reputational Risk

At a glance:

• Social media plays a larger and larger role in the decision-making and information-sourcing of customers
• A strong brand is key to a successful business, so management of reputation and reputational risk is a must
• Governance and products/services can be key areas of reputational risk for any business
• Once you know where your business’ reputation is at risk, you can put plans in place

What is the risk?

Reputational risk should be one of the key concerns for the modern business, regardless of size. This is due in no small part to the unprecedented role that social media plays in customers’ decision-making and information-sourcing.

The number of business scandals that have been amplified by social media’s reach and immediacy is enough to keep businesses large and small awake at night. It should also be a big worry for businesses because reputational risk is intangible. It’s defined as the emotional connection between a brand and its audience, and is therefore very difficult to measure or assign a value to its impact.

A strong brand is key to a successful business, so management of reputation and reputational risk is a must. Not only that, it needn’t necessarily cost anything to your business to do so.

Locate the risk

There are a number of areas within a business where reputation is at risk: products or services, innovation, workplace, governance, citizenship, leadership and performance. The two areas on this list that many businesses believe are lightning rods for reputational risk are governance and products/services.

Governance reflects how people view the business as a whole with regards to honesty, integrity and conduct and is therefore more likely to impact a business at a high level.

Products or services tend to be given greater attention on social media and in the press purely because it’s the aspect of the business that directly affects consumers. With this in mind, it’s important to determine which areas of your business are the most at risk for reputational damage.

Manage the risk

Once you know where your business’ reputation is at risk, you can put plans in place to prevent and manage any potential crises. These are the key steps in establishing risk management procedures.

1. Consider scenarios that are most likely to apply to your business
2. Quantify the impact as much as possible to determine the severity of the event
3. Identify the stakeholders (customers, media or press, regulators, communities, employees etc.)
4. Determine if insurance is available to transfer the risk
5. Set up controls, policies and procedures so you know immediately how to respond to the event
6. Have monitoring in place to keep track of reputational impact following the event

The most important part of reputational risk management is to have plans in place to manage any potential crises. These plans should be controlled, authoritative, have clear priorities and optimal stakeholder communication. Above all, your business should exercise transparency: make all relevant information available and don’t conceal knowledge, as this can result in delayed and increased reputational damage if or when a concealed fact is discovered.

Find out more about Kerry London’s experience sourcing tailored Brand Reputation insurance.

Categories: Small Business,