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General Risk Management Ethics


Managing Reputation Risk

2017-03-24

Reputational Risk Management – The ‘Nuts and Bolts’

 

Managing Reputation Risk

Two beverage bottling companies in Nigeria are currently battling to save their reputation.  Of recent they have been going on radio, television, newspapers and social media to convince consumers that the negative news that filtered out about their products recently is totally false. Government agencies like NAFDAC, Standard Organization of Nigeria, & Federal Ministry of Health etc have also stepped in to reassure the public (about the safety of the products) while there is an ongoing case in the court regarding some of these products. Why are the companies taking these measures which involve spending a lot of money just to re-project their images? It is a way of managing reputation risk. Why would the government agencies also be interested in this issue? It is due to the implication of these developments not only on the reputation of the companies but also on the reputation of the food and beverages regulatory bodies. Since these products have been certified by the agencies as fit for human consumption, any other information to the contrary has grave implication on the certifiers’ (government agencies) reputation. This is the reason why they would not fold their arms but use every avenue to defend their certification. 

Another example is when the financial regulators came out recently to reemphasize that two particular operators in the banking sector were not distressed. This clarification was in response to the rumors being peddled in the public that the banks were seriously distressed and the implication of this for the entire banking system and the regulators’ reputation is very clear. The responses by both regulators in the cases highlighted above are some of the ways of managing reputation risk.

What are the other ways of managing reputation risk?

PROTIVITI identified some keys of managing reputation risk. The keys are grouped into five categories: strategic alignment, cultural alignment, quality commitment, operational focus and organizational resiliency as follows:

Strategic Alignment

Strategic alignment begins at the top, with board oversight, strategy-setting, business planning, image  building and branding all focusing on enhancement and sustainability of organization’s reputation as follows:

Effective Board Oversight

Strong board oversight on matters of strategy, policy execution, risk management and transparent reporting is vital to effective corporate governance, a powerful contributor to sustaining reputation. For example, through the risk oversight process, the board determines that the company has in place a robust process for identifying, prioritizing, sourcing, managing and monitoring its critical risks (including reputation risk) and that this process is improved continuously as the business environment changes. Thus, the board’s risk oversight lays an important foundation for managing reputation risk.

Integration of Reputation Risk into Strategy-Setting and Business Planning

This is to ensure that reputation risk management is considered ab-initio in the determination of risk appetite and other strategic drivers of the business. Such an organization would not invest their ‘energy’ or resources on any business or product that is ‘defective in reputation’ no matter the gains or profits and this will clearly reflect in the organization’s risk appetite statement. 

Effective communications, image and brand building

The messages the press, analysts and others communicate about an organization through print and electronic media and word of mouth are very important in managing reputation risk. However also, a company must be able to walk the talk. No matter the amount of resources used in influencing the image through the press or other means, if it is not backed by good practices, the same image could, in a jiffy, crumble like a pack of cards, especially in these days of social media influence. But if a company’s image is built on a solid rather than deceitful foundation, any weapon of warfare deployed against its reputation in form of blackmail, subterfuge, stratagem, etc, may not easily stand.

 








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