CRISIS PREPARATION – NOT ENOUGH TO PROTECT YOUR REPUTATION
What is one of the best ways to leave reputation value on the table and make your firm vulnerable to future reputation risk?
The answer: assuming that crisis preparation is enough when it is only the beginning.
Unless you are working to identify the core elements of your firm’s unique reputation value equation and using them to actively drive tangible business value, you are leaving potential advocates and money on the table every day. In a world where reputations can crumble in the time it takes a tweet to start trending, these are risks few firms can afford to take.
Reputation risk is nothing new, of course, but it is more important now than ever for a number of reasons. First, for most corporations, intangible assets make up the majority of enterprise value and reputation is typically the biggest component. Second, most enterprise risk management (ERM) assessments given to the board put reputation risk at the top of the list. And third, unlike the other risks on the list, the mitigation options tend to be ‘soft’ at best.
Some savvy organisations will fundamentally change a business strategy in order to reduce or eliminate the underlying root causes of a risk. For example, an investment firm might decide to divest from controversial industries or countries to avoid getting its company name tied up with environmental disasters or human rights issues. Another example would be changing a compensation plan that has the potential to incentivise illegal or unsavoury behaviour (this is what Wells Fargo should have done). Unfortunately, these ‘harder’ risk mitigation efforts are rare, as their cost is often higher than a company is willing to bear.
Oct-Dec 2021 Issue
Anthony Johndrow and Mike Phifer