Reputation risk is the risk of damage to your corporate image; it can reduce trust in your business and lead to destruction of value. It represents the risk of bad publicity or negative relationships with employees, customers, partners, counterparties and regulators. Reputational risk can be a serious threat to the assets of a firm.
However Harvard Business Review recently observed:
"Most companies do an inadequate job of managing their reputations in general and the risks to their reputations in particular. They tend to focus their energies on handling the threats to their reputations that have already surfaced. This is not risk management; it is crisis management—a reactive approach whose purpose is to limit the damage."
Manage reputation risk
Like any other significant business or strategic risk, reputation is a risk than can be managed. Not surprisingly, like the management of other corporate risks, careful reputation risk management requires reliable information including reputation research. This calls for more than just regular reporting of a simplified quantitative reputation score. If as HBR suggests a company’s overall reputation is a function of its reputation among its various stakeholders (investors, customers, suppliers, employees, regulators, politicians, nongovernmental organisations and the communities in which the firm operates), then managing that reputational risk must explore each of these key stakeholders’ perceptions of the organisation. Clearly this is not achieved using only quantitative surveys to generate scores.
Gather key stakeholder insights
The most powerful tool to capture the informed insights and perceptions of these key stakeholders is through in-depth interviews. These senior level dialogues present the opportunity to fully explore the senior stakeholder’s informed perspectives of an organisation and when performed by an independent researcher, these stakeholder interviews invite a level of honesty that encourages robust feedback. Informed by these powerful insights reputation risk management is more comprehensively relevant and responsive.
Key stakeholders provide informed perspectives
Typically organisations will invite 20 to 60 key stakeholders to take part in these confidential conversations, with respondents being assured their comments will not be attributed to particular stakeholders. The outcome is a set of informed, insightful and senior perspectives about the organisation’s reputation risks.
The results of these interviews across a wide range of key stakeholders are then analysed and key themes to emerge are identified. The primary focus of the researcher is to identify stakeholder expectations, which are not being met by the organisation. It is these factors that threaten the organisation’s reputation and represent the leading reputation risks to be managed.
Tracking community perceptions
There is a place for complementary quantitative research in managing reputation risk. Firstly, it enables an organisation to capture the points of view of a very large audience or community, and secondly as characteristics that are detracting from the organisation’s reputation are identified, these perceptions of the organisation can then be tracked periodically to monitor changes in perceptions of the organisation among certain audiences.