Reputation Risk

On average 25% of a company’s worth is in its reputation. The information age means a few key presses can generate huge damage to a company’s reputation. Whether you are Tesco recovering from a huge financial scandal and demonstrating gender preference with their toys or RBS being hammered again for appearing to close the accounts of a critic unfortunately your reputation on a knife edge.

Deloitte’s 2014 global survey on reputation risk says “Eighty-seven percent of the executives we surveyed rate reputation risk as “more important” or “much more important,” and 88 percent say they are explicitly focusing on reputation risk as a key business challenge. A reputation risk that is not properly managed can quickly escalate into a major strategic crisis.” –link

Here are the most common events which cause a reputation hit.

Ethics and integrity –  The ‘bankers’ have been subject to a number of mis-selling scandals and accusations of fraud within there ranks, this has created a general distrust around the entire sector. Energy companies have also be hit will claims of price fixing and mis-selling.  Although not occurring so often in the UK, bribery and corruption are also in this category.

Security risks, including both physical and cyber breaches – Whether its losing a USB stick on the bus or having a ‘Target’-ed cyber attack.

Product and service risks – particularly safety, health, and the environment. The notorious product recall is a necessary but hugely damaging activity which unfortunately has become more common in recent years due largely to overseas manufacturing. Fortunately rare but the death or injury of an employee or customer as a direct or indirect result of contact with the company can create a huge reputation hit.

Third-party relationships – with companies increasingly being held accountable for the actions of their suppliers and vendors. Everyone is familiar with clothing chains being accursed of using sweatshops and the horse meat scandal which dealt a huge blow to the confidence placed in supermarkets.

Reputation comes down to integrity and trust, understand and clearly communicate the organisations values and making sure you practice what you preach.

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