After financial risk, reputation risk is the biggest concern that keeps board directors awake at night, according to the latest poll from EisnerAmper via Survey Says Boards Troubled by Reputation Risk – Compliance Week.
These days Reputation Risk is a a real threat or danger to the good name or standing of an organization due to the immediacy of the sharing of negative information and the impact of Social Media.
For a long time experts debated whether Reputation Risk was a strategic risk or a consequence of a risk.
What has become clear though is that it is now a“Meta risk – a potential menace to fundamental business strategy, and possibly an even greater hazard to organizational survival than a financial restatement or problematical findings in a compliance report”.
Reputation risk can occur through a number of ways: directly as the result of the actions of the company itself; indirectly due to the actions of an employee or employees; or tangentially through other peripheral stakeholders, such as joint venture partners or suppliers.
In addition to having good governance practices and transparency, companies also need to be socially responsible and environmentally conscious to avoid reputational risk.
This importance has been confirmed through a recent report “With CSR In Global Demand, Corporate Reputation Is At Stake”, according To New Research From Cone Communications And Echo Research: PR Newswire (http://money.msn.com/business-news/article.aspx?feed=PR&date=20130522&id=16510227#scpshrjmd)
This must – read report shows that CSR is now a direct driver of Corporate Reputation and major cause of Reputation Risk.