Reputational risk is the risk that an activity, action or stance performed or taken by a company or its officials will impair its image in the community and/or the long-term trust placed in the organisation by its stakeholders, resulting in the loss of business and/or legal action.
Essentially all risks and all related components of the group potentially impact on reputational risk.
Think about this one for a second…
You’re the CEO of a large company with a daily operating budget that floats somewhere in the millions. Your profit margin is already pretty thin and demands all your management skills to keep things in the black. Suddenly, something absolutely crazy and totally unexpected for which even your best contingency planning didn’t prepare you hits you dead on, sinking your thin profit margin into a deep, deep sea of red ink. I’m talking billions here…
No, this isn’t a cheap attempt at dramatics. It’s a nutshell summary of what happened to the airline industry after September 11. We could argue that those are exactly the times when managers really need to remember what they learned in management school. The truth is, however, that (a) We don’t teach them how to deal with crises like that; and (b) they don’t have time to worry about soft and hard skills, etc. when their pants are on fire. All they will worry about is whether they can save the “money”, because after all that is what the shareholders will hold them accountable for.
It is in situations like these that a person will display their normal crisis management style, and unfortunately what will happen is that managers will go for quick solutions rather than proper root cause analysis. There will be a tendency to address symptoms rather than real causes.
Part of the problem lies in our training that we provide in organisations. I am not saying that the quick and dirty phenomena is happening because training departments are doing such a lousy job, at least not from the perspective of understanding what management is about.
Where departments fail is in not performing regular simulations under which crisis readiness and decision making under stress can be tested. Where training departments fail is in not providing their managers with hard nose business skills training, things to do when faced with a crisis, things to prevent smouldering crises from erupting into perceptual crises, teambuilding and decision making under conditions of severe stress, etc.
What is needed is a solid understanding of the processes that support problem solving and ethical decision making and proactive thinking while studying management struggles, confusion, dilemmas, and the moral challenges managers face. Managers need training in understanding the many elements of crisis management, including such critical areas as crisis planning and preparedness, crisis communications, security of human, physical and intellectual assets and organizational behaviour, communication management problems and strategies.
That way we can assure that our management teams can make proper and ethical decisions when times of trouble come, decisions that will rather build than destroy a company’s good name. Let me ask you a question:
- Does your company have a crisis management plan that has been truly tested and simulated in the past few months?
- Does Crisis Management & Communication training feature in your training calendar for the year?
Unless it does, your company is a long way off from being adequately prepared. Don’t be upset if quick and dirty solutions are part of your organisation’s behaviour patterns. Sometimes incidents happen due to unfortunate oversight. Most of these times I believe they happen because management have not been sensitised to the importance of managing a company’s greatest asset – its reputation.
In many cases Reputational damage could have been prevented had management received training in the management of reputation.
Prevention is normally better than cure. Management teams should receive training in what reputation is, why reputation is an asset and a risk, the various drivers of reputation, how it is measured and destroyed, strategies for building, sustaining and protecting reputation, corporate governance, ethics and media understanding and media survival skills. It does not matter if you are working for Government, a Corporate or an NGO – Reputation remains the same and has the same impact.
Often Management asks about the cost of training. Why not consider the flipside of the coin? What is the cost of NOT training management in reputation understanding?
The question to ask is whether Organisation’s do enough to sensitise their management teams. BP did most of the above, and yet, even that wasn’t enough. Now that is even more scary!
If you would like to learn, how to prevent reputation risk emerging in your organisation, or would like to hone your crisis management skills, you would not want to miss this training event coming up.
|What:||Reputation Defence & Protection (Reputation Risk Mitigation) Masterclass
This two-day Masterclass provides comprehensive and practical coverage of all aspects on how to protect and defend an organisation’s reputation, and is based on more than 25 years research and experience on how to protect business reputations. The title word includes the verb defend. The reason – the word defend is generally defined as to take measures to make or keep safe from danger, attack or harm, and implies the actions of protecting, safeguarding, shielding, supporting or preserving. The requirement to defend can be associated with an individual, group, place or thing, and can be associated with honour, reputation, territory, assets and allies (stakeholders). It offers not only international best practices but also provides guidance how to implement a reputation risk management and protection framework. Worldwide reputation risk is seen as the highest-order risk and most dangerous to organizations, because of its volatility and unpredictability. Part of the problem is that some regard it as a strategic risk whilst others see it as a consequence of a risk. The way an organization therefore defines it, will have a material impact on how it will be mitigated and treated. Because reputation risk is volatile, unpredictable and often unquantifiable, it often happens that; what an organization regards as a small incident or issue, erupts and has a major impact, because stakeholders viewed it differently. Understanding the systemic interplay of factors is therefore vital in understanding this risk. If you’re responsible for ensuring that your organisation responds to and survives any form of reputation risk event – this Masterclass covers all the key steps necessary.
|When:||Tuesday, July 20, 2010 11:00 AM to Wednesday, July 21, 2010 12:00 PM|
Johannesburg, Gauteng South Africa