Building reputation resilience
From The Wall Street Journal’s CMO Today
A brand’s reputation is among its most important—and most vulnerable—assets today, but cultivating reputational resilience with a cohesive and technology-enhanced strategy can enable companies to both prepare for crises and create enduring value.
Reputation and brand are two sides of the same coin. A company’s brand—which is focused on the products and services a company promises to its customers—is aspirational. It’s how the organization hopes it will be perceived. A company’s reputation—the thoughts and feelings about it held by its broad set of stakeholders—is how the company is actually perceived.
While many organizations are good at building their brands, many fail to apply the same level of discipline to managing their reputations. A number of factors can contribute to this. Managing reputational risk often doesn’t fit neatly into a single function, creating unclear ownership and accountability. There may be insufficient understanding of the sources of reputational risk, how to manage those risks, or what the full impact of a reputational crisis could be. In addition, there may be cultural resistance to the changes in behaviors required to manage reputation risk more effectively.
Yet, corporate reputation has never been more important—or more fragile. It’s one of the most important assets in almost any organization, typically playing a critical role in creating value and driving the business forward. In today’s 24/7 media cycle, customers and other stakeholders are increasingly connected and well informed—and a reputation that’s taken decades to build can be torn apart in seconds. Reputation-linked losses at public companies have increased by 301 percent over the past five years, according to a study by Steel City Re.1 Last year was a record one for business crises, according to the Institute for Crisis Management 2018 Annual Crisis Report, with the number of incidents increasing 25 percent over the previous year.2
It’s likely no surprise, then, that in a recent global survey by Aon Risk Solutions, executives rank brand and reputation damage as the number one enterprise risk.3 Nearly three quarters (73 percent) of board members responding to a recent Deloitte survey say reputational risk is the area in which they feel the most vulnerable, but only 39 percent say they have a plan to address a reputation crisis.4 The potential consequences of not having such a plan when things go sideways can be significant, including loss of customers and revenue, damage to investor confidence, significant recovery costs, and boardroom and C-suite casualties.
There are likely opportunities for organizations to more proactively manage reputation to stay ahead in this competitive and dynamic marketplace—in their day-to-day activities as well as in times of trouble. Those that create a systematic, company-wide approach to reputation management and adopt new risk-sensing tools and capabilities may not only increase their reputational resilience, but also harness their reputations to drive their corporate strategies forward.
A cohesive approach
Companies with well-defined, effective reputation management practices are often able to build their reputation resilience and shape business outcomes in good times and bad. Those that manage reputation well likely understand the business ecosystems and build trusted relationships with stakeholders that matter most. The trust and value of these relationships can serve as money in the bank that can be drawn upon in times of crisis or brand shocks. That goodwill can enable leaders to navigate these situations with confidence because they have built the resilience necessary to not just emerge—but to emerge stronger—from potential setbacks.
A key is to not just protect the reputation, but also to deploy strategies to enhance it. Often the most successful companies take a proactive approach to managing, nurturing, and monitoring their reputations. Many approach it not just as a byproduct of other risks, but as a critical asset that can fuel the business.
A programmatic, enterprise-wide approach to reputation management commonly includes four key elements:
- Strategy: A clear and consistently applied vision for reputation management, aligned to business objectives, can help to amplify brand and reputation and differentiate the organization in the marketplace.
- Advocacy: Engaging and empowering internal and external stakeholders in purposeful ways can enable these diverse groups to champion the brand and protect the organization’s reputation.
- Resilience: Sensing, assessing, and managing risks and proactively planning to protect reputation from crises can enable an organization to respond to and recover from reputational jolts more effectively.
- Governance: A cohesive program can help ensure that the above components work together in concert and includes means for measurement, monitoring, and continuous improvement.
When done well, this approach can connect capabilities and resources throughout the organization to effectively manage internal and external threats to reputation. It’s not about creating a new function or additional work, but about connecting reputation management to the things a company may already be doing in the area of risk management and business resilience.
The return on risk sensing
Successful reputation management often involves sensing, assessing, mitigating, managing, and responding to threats. Those companies that build such capabilities into their risk governance structures can identify potential risks and opportunities early, evaluate their impact, and make better decisions about how to act on them.
At one time, risk sensing and response was largely a matter of hiring a public relations firm to advise on what was happening to the company from an outside perspective. However, the state of the art has advanced. With today’s technology, reputation risk sensing can be done in a more cost-effective—and near-real-time—manner.
Many leading risk management programs incorporate 24/7 monitoring of traditional and social media sources, along with other internal and third-party data sources. Top-notch teams of analysts, enabled by analytics and risk intelligence tools, scan the environment for trends, high-impact events, and other changes in the ecosystem. They continuously monitor those topics across a variety of data sources and generate regular reports that can enable their company to act on risk factors before it’s too late. This can be helpful in deciding how best to navigate reputational threats and manage communications and relationships with important stakeholders. Such risk-sensing capabilities can be applied across the enterprise, including talent in the workplace, high-impact events, financial risk, digital assets, socio-economic and geopolitical risk, and competitive trends. It can help organizations accelerate the discovery of reputational risk and, in the best cases, preempt them. Just as powerfully, it can inform strategic choices and drive the corporate agenda forward.
In fact, there can be a huge opportunity in considering reputation in the full business context and linking it to strategy and planning. In so doing, reputation becomes more than just a risk to manage, but a critical asset that can be leveraged to help enable the organization’s overall success.
—by Keri Calagna, principal, Deloitte & Touche LLP; Mike Fay, principal, Deloitte & Touche LLP; Antonio Crombie, manager, Deloitte & Touche LLP; and Jennifer Turner, manager, Deloitte & Touche LLP
1 Dr. Nir Kossovsky and Peter J. Gerken, CPCU, Steel City Re, “The Looming Reputation Risk Explosion: Massive Financial Impact Possible in 2018 from Corporate Reputational Crises,” December 2017
2 ICM Annual Crisis Report, April 2018
3 AON, Global Risk Management Survey, 2017
4 Peter Dent, Deloitte global crisis management leader, “A crisis of confidence”