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From the moment Federal Treasurer, Scott Morrison declared APRA’s CBA prudential inquiry report “should be the next item on the agenda for every board meeting in this country”, directors sensed the crosshairs on their forehead.

Now board risk committees all want to talk about their reputation risks. In Company Directormagazine’s 2018 RISK FACTOR FORECAST, three of the five greatest risks facing companies related to reputation. This unprecedented level of board focus and individual directors’ desire to act, make it a poignant moment for Australia’s corporate affairs leaders. But providing boards with a robust approach to discovering specific reputation risks, calls for a new tool.


Reputation risks are hidden

Reputation risks are usually silent but deadly secrets few inside your business will talk about. Rooted in ‘self-interest’, they are condoned by those with most to gain, never openly questioned by their aspiring underlings and rarely mentioned in board discussions. Then suddenly victims speak out and the story explodes. Allegations of sexual harassment against a Lord Mayor, a financial institution charging its customers for services never provided, its leaders editing ‘independent’ reports, our largest bank committing 53,000 breaches of security, its life insurance arm rejecting claims from the dead and dying, aged care companies pushing the elderly out, a string of franchise businesses underpaying employees and the national cricket team using sandpaper on the ball in an effort to win. No wonder directors are demanding greater visibility of their company’s reputation risks. 


Media momentum



The media can’t believe the continuing flow of scandals. This year the ABC’s Four Corners chalks up its 57th year, each partly spent exposing corporate greed, ignorance and self-interest because many Australian corporations choose not to have informed conversations about their reputation risks. Each week it hangs out the dirty washing of companies and boards that failed to spot the stains or ask informed questions about how they got there, each episode giving other victims the confidence to say #metoo. Speaking at forums last week in Sydney and Melbourne Adele Ferguson described ‘spin and the undermining of whistleblowers’ as the consistent responses she encounters from corporate affairs leaders. While directors are asking to have their company’s reputation risks identified, many corporate affairs leaders are responding after the event, when the crisis breaks. Directors are feeling the heat and boards now expect their corporate affairs leaders to get ahead of the game. 


Research options exist

Companies don’t have to wait for a ‘royal commission’, ‘inquiry’ or ‘Four Corners’ to expose their reputational risks, proven research methodologies which engage a company's key stakeholders are already being used by switched-on entities, to understand their reputation and risks. Surprisingly, other large companies are yet to adopt these contemporary sources of rich insight, many still only using simple reputation tracking surveys such as RepTrak which this year actually promoted AMP 5 places up the reputation rankings, based on its survey conducted in February and March of 2018, just before the Haynes royal commission brought the truth to the surface in April, 2018.  


Public perceptions


Reputation tracking surveys like this rely on public perceptions, usually gathered by asking members of the public to score the company against standard criteria. While the results provide metrics against reputation attributes, they don’t actually identify any specific reputation risks. More concerning, these results are a lagging indicator of a company’s polished facade, gathered from an audience with only superficial perceptions. By the time the general public thinks the company is falling short of their expectations, the reputation damage has been done and the timeframe for correcting this is at least 1 to 2 years.


Specific ‘publics’

Other reputation tracker surveys ask certain valued ‘publics’ to score the company against these predetermined standard criteria, but while these may access some better-informed stakeholders, they collect superficial scores about the company rather than securing insight into specific reputation risks emerging behind the scenes. If corporate affairs leaders are to confidently lead board risk committee discussions about reputation risks, they need an evidence base of rich, well-informed insights as their foundation.

“Reputation metrics and customer surveys are an established and relatively comparable indicator, but it remains uncertain whether they truly capture the breadth and richness of issues that are most relevant to social licence and trust.” KPMG-AICD 2018 Trust Survey  

Ask key stakeholders


Companies that really want to know how they are perceived and what their reputation risks are, interrogate those best placed to know, their key stakeholders. The customers and suppliers that deal with them, the rivals that compete against them, sector partners who seek to collaborate with them, the communities that live with them and clean-up after them, the regulators that police and investigate them, the lenders that finance them, analysts that cover them, think tanks that challenge them and the people that work for them.

Reputation risks can only be fully understood through searching, in-depth interviews with those close enough to speak about your business in detail. These key stakeholders see a company’s behaviour from very close range, they observe its priorities under pressure, witness its decision-making and are well informed about its market, strategic position, history, environment and leadership. Their perceptions are insightful, educated, evidence based and up to date, ensuring they are leading, not lagging.


The best reputation research methodology


Given key stakeholders have such rich knowledge; the choice of research methodology to gather these insights is vital. Online surveys and overcrowded focus groups both fail to interrogate the details of your reputation risks with the key stakeholders who know them. Truly effective reputation research calls for independent, confidential, one-on-one, in-depth interviews with key stakeholders, performed by experienced researchers.


Reputation research; confronting but constructive

Reputation research among key stakeholders is not for the faint hearted. When a capable independent researcher asks 30 senior key stakeholders to privately and confidentially discuss their perceptions and expectations of your company, the results will be confronting. This process is not some open-ended exercise in diplomacy or stakeholder consultation. It is a searching, structured and strategic exploration of your company’s specific reputation risks and how they should be addressed.


Corporate affairs leaders have a new tool


Reputation research among key stakeholders is enabling corporate affairs leaders to get ahead of their reputation risks. This model of reputation research provides them with the valued perspectives of their key stakeholders and the evidence base to lead board level discussions about reputation risks. They find themselves doing more listening to the informed perspectives of key stakeholders, less reacting to issues or events and therefore, less spin. The boardroom value proposition of corporate affairs leaders equipped with this information is not to ‘spin’; it is to ‘bring the outside perspective in’. Providing the executive team and board with reliable insights about how they are perceived, the key stakeholder’s expectations they fail to meet and their specific reputation risks.

If you found this article informative or challenging, ‘share’ it with your executive team, board risk committee or network to spark the discussion about identifying your reputation risks. If you have used key stakeholder conversations in this way, I invite you to 'comment' about your experience.


David Armstrong is Director of Reputation Research Pty Ltd, a specialist reputation and stakeholder research practice which brings the experience of over 50 major reputation studies, involving 1500 in-depth interviews with key stakeholders including over 300 CEOs. This email address is being protected from spambots. You need JavaScript enabled to view it.

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