Making the intangible tangible

Our Analyst, Joel Thompson recently contributed to the Digital Banking Club  highlighting the opportunity for the retail banking sector to meet stakeholders needs by operationalising reputation

Like a premium brand, a premium reputation can deliver unrivalled value for a company. The value that reputation offers retail banks is particularly great at a time when the Big Five are beset with consumer, regulatory and financial issues, besides broader issues relating to their brands – trust in particular, writes Joel Thompson

Reputation is often perceived as an intangible asset – hard to measure and therefore easy to miss or undervalue. Yet there is a growing recognition among executives that a strong reputation has a palpable presence that permeates the organisation at all levels. The question then is: How can it be measured? How can it be used as tool for reputation management and deliver stakeholder value?

These questions are particularly pertinent for retail banks. Sprawling operations across global markets make large banks vulnerable to reputational risks. While some can be foreseen and proactively managed, daily sentiment towards a company is volatile. Emerging risks can be impossibly tough to foresee and manage.

There is, however, a priceless resource available to retail banks for identifying reputational risks and opportunities thus allowing banks to act in anticipation of them. Unstructured or “big data” is a vast reservoir of stakeholder perception and sentiment towards a company, constantly replenished and fed by millions of sources. With the right tools, this reservoir can be accessed and its waters filtered and channeled in ways that create a useful picture of a company’s reputational performance. The intangible becomes tangible.

For retail banks in particular, reputation intelligence derived from big data has the potential to make reputation management more straightforward. For example, reputation insight can create a competitive advantage by clarifying and quantifying stakeholder sentiment according to key drivers of reputation, such as corporate culture, corporate leadership, financial performance and social performance.

This is particularly pertinent to retail banks given the interconnectedness of reputational issues facing the sector – not to mention the potential risks the sector presents to the economy and the notion of banks being “too big to fail”. It is more important than ever for retail banks to proactively manage their reputations. The “reputational return” of doing so cannot be underestimated.

Insight derived from reputation analysis is an essential tool for proactively identifying and managing emerging risks and opportunities. Of the industries and companies we track, some companies benefit from leveraging a premium reputation and use it to reinforce brand aspirations and the perception of being a responsible business. The banking sector is lagging behind. alva’s analysis reveals sentiment towards the sector was negative in late 2013; the sector scored 5% less than the FTSE 100 and 10% less than the leading sector in alva’s reputation index. Nevertheless, two of the Big Five achieved a positive sentiment score towards the end of 2013.

2014 will no doubt challenge retail banks to find new ways to meet stakeholder demands. Decision-ready reputation insight is increasingly the business standard in risk management and the retail banking sector has the opportunity to gain from it as much as other sectors – perhaps even more.