Global corporate executives attribute 63% of their company’s market value to the company’s overall reputation. In their view, the top five contributors to reputation are:

• Quality of products or services
• Quality of employees
• Quality of customer service
• Safety of products and services
• Respect for customer or employee privacy¹

A company’s reputation is a precious asset that can take years to build and just days to destroy. This is why managing against reputational risks is so critical to preserving and growing a business, no matter a company’s size.

Seven Ways to Manage Reputational Risks

Reputational risk can come in many forms. It can be a failure to meet regulatory requirements, a video of a worker being disrespectful to a customer or a record of discriminatory hiring. These and many other common reputational risks can be avoided, provided a company is committed to making reputational risk an essential element of strategy and planning.

Here are seven ways to manage reputational risk.

1. Identify all reputational risk exposures to the business. For example, examine hiring and firing policies and practices, as well as all touchpoints with regulators and customers, to determine where risks may lie.
2. Remain disciplined and vigilant about processes that control the customer experience. In today’s world of online reviews and social media, customers will let others know of their experience.
3. Protect against data breaches. Few things turn off customers quicker than knowing that their most sensitive personal data have been exposed.
4. Train employees in risk management. This is important, especially for the front-line troops that interact directly with customers. Encourage employees to speak up about service or product issues that may damage the company’s reputation.
5. Act ethically. When in doubt, always ask the question, “Would I be happy to read about this on the front page of The New York Times?”
6. Be proactive about building a positive image. This can be done through community involvement and communications. A strong reputation will better enable a company to weather the impact of any future adverse events.
7. Measure reputation. Business activities that cannot be measured cannot be managed. Devise a measuring framework to track reputation over time to gauge relative progress. Consider employee satisfaction, stakeholder surveys, online customer reviews and ratings, and awards and rankings as some relevant measures.

In this digital era where individuals have an vast online reach, and particularly in today’s social climate, reputational risk is of utmost importance.  Reputation should never be considered an afterthought; preventative measures and a culture of adoption are paramount.

Sources:

1. https://www.webershandwick.com/wp-content/uploads/2020/01/The-State-of-Corporate-Reputation-in-2020_executive-summary_FINAL.pdf

Please reference disclosures: https://blog.americanportfolios.com/disclosures/