Andrew discusses with Andrea Bonime-Blanc, CEO of GEC Risk Advisory, her new handbook on: Reputation Risk–in an age of hyper-transparency.
“Why did you decide to write this book now, as opposed to say a year or so back–what has changed in your view to make it so needed now?”
AB: The reason reputation risk has suddenly become so important is we live in the age of hyper-transparency. There are few places to run to or hide in; the dangers and opportunities relating to reputation have expanded dramatically. Several reasons drew me to this topic.
First, I’ve grown tired of using certain words such as “ethics” and “compliance” that busy business people either don’t understand or don’t want to understand – they grasp concepts of risk and reputation much more readily.
Second, the word “reputation” has been much explored and studied but mainly by folks in the public relations, branding and communications fields. They bring expertise to reputation management but not necessarily to reputation risk.
Third, in late 2013, there was strong reinforcement of what I was writing and speaking about to clients. At that time, several leading organizations published surveys showing that corporate boards and CEOs considered “reputation risk” to be one of their top strategic risks.
Fourth, I work at the leadership and governance levels of global companies. I have first hand evidence that the concept of reputation risk resonates strongly and constructively with them and they have both a need and an interest in learning how to deal with this issue more effectively.
Finally, a UK-based publisher proposed last year that I write a short and practical book for their DōShorts series (http://www.dosustainability.com).
Writing it appealed because I saw a need for a practical handbook for executives, directors and practitioners. They needed help to understand, triangulate and deploy solutions to reputation risk.
It was not enough to just read survey results telling them what they already know – namely that their peers are just as concerned as they are about reputation risk.
AB: Certain industries seem to factor the cost of reputation damage such as litigation, consultants, crisis management costs and so on into their cost of doing business.
Given the realities of the age of hyper-transparency I think this is foolish and short-sighted. However, even these sectors are moving in the direction of better reputation risk management by necessity and because of increasing stakeholder expectations.
There are some operations and organizations that lie somewhat outside of the mainstream. In the book I say they have either a “reckless” or an “outlaw” organizational culture where the rules don’t matter until they get caught.
An example of a reckless culture might include a mining company that has no problem accumulating heath and safety violations and paying fines for the privilege.
An outlaw culture also includes many organizations that operate underground, for whom reputation, at least in the more mainstream conventional sense, is unimportant, such as narco-traffickers. Yet even for these organizations reputation risk exists if they do not meet or exceed the expectations of their stakeholders.
“Do you think most big organisations seriously under rate the issue of reputation and how to protect it?”
AB: The larger leading global companies are closer to understanding reputation risk, brand value and organizational culture concepts. But they too are just starting to understand the connection between brand management and reputation risk.
It is the medium and smaller, earlier stage companies – many of which are in the global tech sector – that don’t understand or want to understand this concept until they get hit in the face with a scandal.
The more established companies realize that this issue can take a material bite out of their equity and future prospects and are getting more prepared to deal with reputation risk through better enterprise risk management inclusive of reputation risk and better crisis management preparedness.
The single most important thing companies of any size should realize is that reputation risk is best tamed and harnessed when the proper internal resilience programs and processes are created and effectively married to strategy.
“Does it always take a reputation disaster for a company, such as Siemens and Fonterra to transform their approach into seeing the whole issue as an opportunity rather than a burden?”
AB: Sadly, human nature is such that we don’t want to think of the downside or the “obstacles” when things are going well. We have an abrupt and sometimes revelatory moment when scandal or other negatives affect us or our organizations.
A few enlightened leaders and companies are getting it right. They realize that by having internal resilience programs such as health, safety, sustainability, ethics, and compliance, they are fortifying their organization for the inevitable scandal that might come. They’re diffusing the impact of negative reputational risk in advance and potentially creating added bottom line value in the process. And they do this by meeting or exceeding their stakeholder expectations.
AB: I strongly believe a cross-disciplinary, issue-focused team approach is needed to deal with reputation risk in this age of hyper-transparency.
Those laboring in the reputation and brand management side of the equation and those who more typically work in the risk, compliance and legal side of the equation, need to reach out to each other.
They need to form coalitions and collaborations around important risk issues to tackle both the embedded risk and the associated reputation risk.
As I state in the book, I view reputation risk first and foremost as an amplifier risk. That is, one that can attach itself to any other kind of risk such as corruption, supply chain, cyber-crime and so on.
Thus the best preparation for reputation risk is a combination of excellent risk management and internal controls with crisis management skills. Likewise, this is also the best preparation for reputation enhancement.
“Is there a danger “risk management” is becoming ever more specialised and the domain of yet more experts rather than a strategic issue as you indicate at the start of the book?
AB: I make clear in the book, reputation risk does not require a new breed or category of risk manager.
In fact, my whole focus is to help organizations embed a reputation risk consideration. Where necessary they need to do this in existing processes and frameworks. This is why it is critically important for boards and c-suites to oversee or manage a risk management approach that is first and foremost linked to the business strategy.
The highest leadership levels of an organization need to understand their big picture risk profile. They must grasp that it relates to their business, including key reputation risk areas.
Once leadership, both governance and executive, truly understand how to do this effectively for their organization, they can direct overall traffic and leave the minutiae of risk management to their internal experts.
Critical to all this is to have savvy cross-disciplinary leaders – both in the functions and the business—who can collaborate effectively on identifying risks, managing and mitigating them and understanding the reputational risk implications of both failures/scandals and successes/opportunities.