Preventing Crisis

Three Reputational Risk Research Insights That Might Surprise You

Posted Apr. 15 2016, 04:23:34 pm

Melissa Lackey

President & CEO

314-469-3500

A poor reputation can be disastrous for organizations, yet most struggle to even identify the reputational risks they face – let alone prevent them.

Studies from EisnerAmper, Deloitte and others illustrate the fact that reputational risk has emerged as one of the top concerns of board members and executives. However, reputational risk is still a fuzzy concept for many – and there’s a lot of unexplored territory in this emerging discipline. The problem? Most don’t know what’s coming, making it close to impossible to prevent reputational risk.

To clarify some of these points, Standing Partnership engaged Edison Research to survey more than 1,000 senior leaders about how their organizations manage reputational risk. Below are three top-line trends we found intriguing.

(To skip straight to the full 2016 Reputational Risk Report, click here.)

1. CEOs tend to gloss over reputation risk; COOs offer a reality check.

Despite the fact that most respondents cited their CEO/president as having the primary responsibility for monitoring reputational risk, only 40 percent of CEOs/presidents said they were even familiar with the term reputational risk (the lowest of all executive functions surveyed). This may suggest that as leaders who set the tone for the entire organization, they tend to be more optimistic about the state of business.

COOs, on the other hand, are not as quick to say their organization does a good job How executives rate their organization in preventing risk study by Standing Partnershipmanaging its reputation (65 percent, compared with 79 percent of CEOs). Only 51 percent of COOs believe their organization is good at preventing reputational risks, compared with 68 percent of CEOs – likely because they can directly see early indications of problems. COOs also are most likely to say the organization isn’t spending enough on reputation management.

These findings emphasize why it’s important for organizations to develop a multi-dimensional view of reputational risks. Effective reputation management requires a cross-functional team effort.

 2. Many industries still don’t understand the relevance of stakeholder engagement to building strong corporate reputations and mitigating reputation risk.

Corporate reputation is defined by stakeholder perceptions, so there’s no way to change your reputation without engaging with stakeholders. However, respondents from a wide variety of industries simply did not believe the practice was relevant to them.

Stakeholder engagement received the lowest relevance score of every reputation Industries weigh in on the relevance of engaging stakeholders -- Reputational Risk study by Standing Partnershipmanagement strategy we asked about – an astonishing fact in a world where stakeholders have more power than ever before. Even more remarkably, these same respondents rated public perception and customer satisfaction as their biggest reputation risks.

Until industries understand and practice stakeholder engagement, their ability to mitigate reputational risk will be seriously handcuffed.

3. Organizations can’t act when they don’t listen.

Customer satisfaction and public perception are cited as the two biggest reputational Reputational Risk study by Standing Partnership: Does your organization monitor for reputational risk?liabilities for organizations, yet nearly half of respondents said their organizations aren’t monitoring for reputational risk issues. Companies that have experienced a reputational issue (more than 1 in 4 respondents) are much more aggressive about monitoring. These organizations have already experienced the pain – and price tag – of a reputation problem and don’t want to be caught with their guard down again. A proactive approach to identifying and monitoring reputational risks can significantly minimize or prevent expensive (and possibly irreparable) issues down the road.

Do any of these findings surprise you? How does your organization stack up against these findings?

For more insights, click here to download the 2016 Reputational Risk Report.

 

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