Perception is Reality: Managing Reputational Risk

Perception IS Reality: Managing Reputational Risk

Perception IS Reality: managing reputational risk

By Christine Hollinden 

The impact of viral communications has created a new focus on reputational risk. For years, management and marketing alike have bypassed risk scrutiny because its results and impact have been difficult to measure. Little consideration was given to the financial exposure that one false step, disgruntled employee, or unhappy client could have on a firm. Today, the voice of individuals resounds across the Web in a few short keystrokes, potentially reaching billions of users globally. Keeping watch on market perception – good and bad – is no longer a nicety. Reputation management is and must be a key performance indicator for any firm.

When leaders are asked about their firm’s reputation, we often hear rose-colored responses, “We have a solid reputation. We’re better than our competitors and everyone knows it. Our clients love us.” That perception often emanates from a perspective based on internal views, not fact. It’s an assumption that also brings reputational risk. When was the last time you evaluated your firm’s reputation from an outside, factual perspective?

Jonathan Copulsky, principal at Deloitte Consulting LLP and author of Brand Resilience: Managing Risk and Recovery in a High-Speed World makes a case that a new playbook and mindset are required for reputation management in this age of high-speed communication. It’s no longer satisfactory to have a single view of a firm’s reputation. Firms must take a 360º view of perception or reputation risk.

Here are a few steps you can take to create a proactive Reputation Risk Management Program:

  1. Identify Risk Boundaries. Talk to each management team member to identify strategic direction, stakeholders, and key points of vulnerability. The discussions should encompass strategic, financial, operational, industry, human resource, regulatory, performance, and communications (social media) exposure. This is no time to sing “Kumbaya.” Be certain that all discussions contain a healthy dose of worst-case scenarios.

  2. Establish External Benchmarks. Survey the stakeholders to gain an outside perspective. One commonly used methodology for establishing a client-related benchmark is Net Promoter that puts clients into one of three categories: detractors, passives, and promoters. Gather information from a variety of sources, addressing all stakeholders identified. Identify the knowns, as well as the unknowns. Don’t forget to look at web-based information such as blogs, forums, and reviews. Finally, compare the Risk Boundaries with the Benchmarks to develop a gap analysis –the difference between existing views and the firm’s strategic direction.

  3. Create a Plan. The final step is to create an implementation plan for monitoring, managing, reporting, and responding. Who will monitor? Which channels will be monitored? How often will external views be captured? What methodology will be used? How will information be reported to management and how often? What is the crisis communications plan?

Risk arrives without warning. In just a few keystrokes, one individual can send team members scrambling to defend your firm’s reputation. It is easier than ever for a firm to proactively manage their reputation. It’s a topic that warrants serious effort. Work with an expert to gain insights and estimate risk exposure. It’s time to treat reputational risk as reality and be prepared.