Managing Reputational Risk
By Hildie Haviland, Advisor
Importance of Reputational Risk for the Future
You may have seen the cell phone video of Chicago airport security dragging Dr. David Dao off his flight to Kentucky back in April of 2017. It was a stunning act and, because of technology today, the video was quickly shared throughout social media platforms and on the 24/7 news stream. United Airlines stock prices dropped, their CEO had to issue an apology and ultimately United Airlines had to change their overbooking policy to help regain confidence with their customers.
In October of 2017, the sexual misconduct allegations against film executive Harvey Weinstein ended his career and exploded into a proposed class action lawsuit against Weinstein, Miramax and former board members of Weinstein Co.
These are just two examples of why Reputational Risk and Crisis Management are such important topics. Any organization, large or small, private or public, for-profit or not-for-profit, should have a crisis management plan to protect their organization’s reputation, valuation, executive leadership and tenure.
We live and work in an era of unprecedented political, social and media volatility. Whether it be the 24/7 news cycle, someone posting an article on Facebook or a petition sent via email about a certain cause, we are inundated with information and breaking news. Social media, in many cases, has become “weaponized” and is seen as a tool for consumers who feel wronged to voice their concerns publicly.
Remember, when it comes to reputational risk – allegations of wrongdoing by the company, a board member or even an employee doesn’t even have to be true. True or not, once it’s out there as an allegation, your company’s reputation is at risk and the negative impacts against that reputation can have rippling long-lasting financial effects.
As commercial risk advisors working with middle market clients, part of our responsibility is to assist with developing strategic Reputational Risk and Crisis Management plans; something many small- and mid-sized businesses have not always felt was necessary. We ensure they have a Pre-Crisis Plan to help mitigate reputational impacts from occurring in the first place and a Post-Crisis Plan to help them recover from such an impact.
Pre-Crisis Planning Steps:
- Understand vulnerabilities
- Assess risks and damage
- Review corporate reputation and its value to the organization
- Build and maintain a good reputation
- Strengthen crisis preparedness
- Monitor social media regularly
- Identify all constituencies to be communicated with and how
- Have a detailed plan in place to respond to events that could impact your organization
- Have a Risk Manager/team with specific responsibilities to respond quickly
Post–Crisis Planning Steps:
- Resolve the Crisis
- Demonstrate ownership
- Communicate decisively, honestly and promptly
- Implement a solution
- Regain the Public’s Trust
- Review processes, governance
- Embed sustainable solutions
- Revitalize stakeholder engagement
Now you may be thinking, “Well my organization is too small for Reputational Risk to affect me.” So, I’ll challenge you:
- What would losing ten customers mean to your bottom line?
- What about losing a large donor for your nonprofit?
- What would the cost be to rebuild consumer confidence in your product again?
Considering the negative consequences, it’s worth taking a look at Reputational Risk and creating a strategic plan. Ask your BKS commercial risk advisor for assistance.