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Reputation: Managing the Risk – Event Highlights

On the 2nd July 2015, Willis and the Institute of Risk Management hosted an event on the increasingly important issue of reputational risk. alva spoke at this event, along with representatives from HS2, Santander, Clifford Chance and Regester Larkin, and we have summarised some of the key points to come out of those sessions:

Alberto Lopez – alva – Founder and Chief Executive

Alberto began by explaining that reputational risk can no longer just be considered a crisis management or PR issue. Companies need to be proactively monitoring and analysing to pick up early signals of emerging opportunities and problems.

The huge amount of information produced every day makes this a difficult task, but it is still essential to do so, and to filter and contextualise the important voices.

He explained the importance of identifying an issue early, as during this “Amber Phase” companies can still take corrective action and even turn a problem into an opportunity. If these early warning signals are ignored then the company will eventually reach a tipping point and fall into the “Red Phase” where reputation falls dramatically and the business is in crisis mode.

The recent Thomas Cook crisis was analysed in detail and we will shortly be producing a case study on this so be sure to sign-up to our white papers to be notified.

 Jill Pearcy – HS2 – Head of Corporate Communications

Jill explained how reputation is an organisation’s most valuable and most vulnerable asset, and that reputational risk comes from the gap between public expectations and corporate actions.

Companies need to take an end-to-end approach on reputation, meaning there should be a cohesive strategy from the board down to all the employees, resulting in a unified culture. She pointed out how reputation can help companies manage risks over time. Things done now can impact on organisations in one, ten, even twenty years’ time; an important consideration when you have long-term projects and contracts like HS2.

HS2’s reputation is key for them to retain political and public support and also allows them to recruit the people and resources that fit well with their own culture and vision.

The session was rounded-up with the proposition that there is a crisis in listening. If companies listen they can respond faster and manage risks better. However, they also need to analyse what they hear, so it is crucial to have both a quantitative and qualitative approach so the sentiment is put into context.

With that information, companies can then answer three key questions:

  • Are there gaps in your reputation?
  • How can you close the gaps?
  • How can you tell you have been successful?

Peter Mitic – Santander – Head of Operational Risk Methodology UK

The core message behind Peter’s presentation was that reputational risk can and should be quantified. However, he said it was still very rare to see businesses attach monetary values to reputational events.

Peter discussed how he has been using alva’s data to drive analysis around the financial impact of reputation within Santander. The data enables Santander to:

  • Track their sentiment trend against their peer group
  • Reveal and highlight emerging reputational issues, identifying the strengths of competitors and potential opportunities
  • Understand the drivers of reputation
  • Classify the negative and positive issues that affect sentiment
  • Produce an objective analysis of sentiment

He explained how, by applying a delay, he was able to map the impact of reputational events onto tangible things like new current accounts or mortgage applications.

His findings have shown that companies can make a direct link between reputational shifts and their finances. This enables them to consider reputational damage in the same way as they would any other risk.

The outcome of his analysis highlighted that bad news has a much bigger impact on sales than good news. This adds weight to the old adage that trust takes years to build, seconds to break, and forever to repair. All the more reason for companies to ensure they have the systems in place to pick up on emerging reputation issues and a strategy to deal with them.

Luke Tolaini – Clifford Chance – Partner

Luke focused on how companies should respond when a reputational crisis hits. He explained that the only message that works is for the company to state that they’ve seen the problem and that they will deal with it in the right way. Problems start to build as soon as a company tries to deflect the blame and make excuses.

In order for companies to avoid getting to this stage, they need to be organised in advance so they can react well to potential issues. When a crisis does develop companies need to deal with the root problem to ensure that it is not just a superficial solution.

He summarised by explaining that when dealing with reputation, companies need to look further ahead than the next day’s headlines. An organisation-wide reputation strategy and a long-term approach will help the company successfully position itself for anything that does arise.

Tim Johnson – Regester Larkin – Chief Operating Officer

Tim believes that while the term “organisational resilience” is widely used among senior executives, few organisations are actually implementing it effectively. Different risks are treated in different ways and in different departments. He thinks that boards need to look at reputational risks more seriously and holistically.

While the Risk function brings a more structured approach to reputation than businesses previously had in place, Tim states that the Risk department still needs to regularly interact with their Corporate Affairs department. Many companies still silo the responsibility for reputation in either Risk or Corporate Affairs, but this is deeply flawed as they need to work together.

This need for a company-wide approach was a recurring theme throughout the event and he stated that one of the most profound failures of senior executives is their current inability to accept organisational values as one of the key pillars for managing reputation.

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