“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” – Warren Buffet
As consumers are more educated and informed, reputation management has become more important than ever. One does not have to think very hard when it comes to examples of large corporations that have dealt with reputational risks. Recent examples include Toyota, Goldman Sachs, and BP. It is precisely why reputational risk management is an increasingly relevant and important strategic issue for organizations, small and large. A tarnished reputation can severely impact an organizations’ ability to sell its products, recruit the very best staff and attract investors. The practice of managing reputational risk is called ‘Reputational Risk Management’ and the very best risk managers know that mitigating doesn’t mean “damage control” but rather they know that it takes a proactive approach to truly ensure that your organization’s reputation is great.
Early detection of a reputational risk is vital to your organization so the tools and tactics that your company uses should be versatile and sophisticated enough to identify issues as early as possible. “If your organization addresses an issue early on, you can monitor the results of your own response and set strategy accordingly,” says Linda Conrad, Director of Strategic Business Risk at Zurich. Before you can monitor your reputation you must understand your stakeholders. It is essential to recognize your organization’s various stakeholder groups and balance the differing interests. Internal stakeholders (employees) have very different interests than external ones (customers/investors). Once you understand these differences you can begin to use certain techniques to measure, monitor and mitigate threats to your firm’s reputation.
Some techniques include:
- Collecting and analyzing customer feedback
- Monitoring the media, including Internet blogs and message boards
- Managing the organization’s relationship with the media
- Investor relationship management
- Tracking business, economic, social and regulatory trends that may spawn new risks
- Managing relationships with potentially adversarial special interest groups
Nearly two thirds of executives participating in a reputational risk survey by Weber Shandwick and KRC Research said they believe it is harder to recover from a reputational failure than it is to build and maintain a reputation. With that said, how are you managing your organization’s reputational risks? Feel free to contact me for advice, best practices and questions at 732.395.4251 or [email protected].
