What is Reputation Risk Management?
Reputation is how a company is perceived in the eyes of its different stakeholders. Always recognized as important, corporate reputation is still seen as nebulous because its business impact is difficult to measure and accountability is often decentralized across the organization.
How to Manage Reputation Risk
Companies who have a clear grasp of their reputation risk are assessing it in the context of the business environment they are operating in and are evaluating it alongside other business risks.
Multiple reputational risk events can stack up across business lines or geographies, and in combination trigger stakeholders into action. Stakeholders perceive the organization as the sum of its parts rather than its components. Geo-politics can create situations where previously aligned stakeholders diverge in expectations of the organization, such as with the brewing US and China trade conflict, or the Israel/Hamas war.
Stakeholder expectations change over time, as demonstrated in recent years by George Floyd riots initiating new DEI practices in 2020, but which is now being countered by an “anti-woke” movement, leading multiple organization to rethink their initiatives due to intense criticism and commercial impact.
How to Assess Reputation Risk
Just like financial risk is continuously re-assessed through monitoring of financial indicators such interest rates, credit spread and share price, Reputational risk needs to be rigorously monitored to provide the organization the leeway to de-risk or mitigate as the stakeholder perceptions and the reputation landscape evolves, making certain reputational risks more likely to trigger, or others less critical for risk management.
To achieve this, an organization needs a comprehensive 360-degree view of its operational environment to detect changes in risk posture as events unfold. At 996 advisors we break these down into three categories of change that needs to be monitored:
Monitoring changes in perception and expectations on important risk topics, such as China/US relations or DEI, as well as more specific topics
Reputational risk increases exponentially as stakeholder groups leverage their circles of influence to sway other stakeholder groups.
Track changes in the expectations towards the industry and peers.
How to Close Gaps
By evaluating changes in these metrics over time, we quantitatively assess shifts in stakeholder interest, activity levels, and organizational relevance for each monitored risk topic. A key benefit to this approach is to provide timely early warning systems, detecting emerging risks as different stakeholders begin to express their viewpoints, and before it starts to affect an organization.
By segmenting data with precise measures of stakeholder, geographic, and for individual topics, the Chief Communications Officer and Chief Risk Officer can assess evolving risk levels and proactively decide who to engage on risk mitigation and transfer strategies before risk events occur, helping the organization shift from a reactive to proactive stance.
Get in touch to learn how we can help you proactively manage your reputation risk.
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