| By Jenny Rayner, Abbey Consulting Executive
Summary Corporate reputation is a key determinant of future business
success. The impact of recent corporate governance and regulatory changes,
combined with growing investor engagement and greater stakeholder awareness, is
making transparency and accountability the norm. A good reputation is a critical
asset to any organisation; it has to be protected and nurtured. The Risks
Risks to reputation can arise from many sources. The major drivers are:
- Financial performance and profitability;
- Corporate governance and
quality of management;
- Social, ethical and environmental performance;
- Employees
and corporate culture;
- Marketing, innovation and customer relations;
- Regulatory
compliance and litigation;
- Communications and crisis management.
Effective management of risk can result in reputation being not only protected
- but enhanced. Managing Reputation Risk
All employees
bear some responsibility for the identification and management of risks to reputation.
However, members of the Board play a crucial role in setting the tone. There
is no 'one size fits all' solution to managing reputation risk. Reputation can
be regarded as a source of risk in its own right and/or as a consequence of other
risks occurring. The critical issue is to ensure that all major risks are comprehensively
identified and prioritised and that appropriate action is taken to manage them.
Key Components
Leaders in reputation risk management have put
the following components at the heart of their approach: - a clear
vision: 'what we stand for and are prepared to be held responsible for';
- clear
values, supported by a code of conduct, setting out expected standards of behaviour;
- policies
clearly stating performance expectations and 'risk tolerance' in key areas;
- understanding
of stakeholders' expectations, information requirements and perceptions of the
organisation;
- an open, trusting, supportive culture;
- a robust
and dynamic risk management system which provides early warning of developing
issues;
- organisational learning leading to corrective action where necessary;
- reward
and recognition systems which support organisational goals and values;
- extension
of vision and values to major partners and suppliers;
- open and honest
communications tailored to meet the needs of specific stakeholders.
The
Business Case
There is increasing evidence that a good reputation enhances
profitability and contributes positively to longer-term success. It does this
by supporting the recruitment and retention of high quality personnel, maintaining
customer and supplier loyalty, attracting investment and bolstering competitiveness.
The ability to manage reputation and its associated risks
effectively will become a key competence in an increasingly
competitive world.
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