Reputational Risk Management

No organization ever envisions being embroiled in a crisis or scandal that will forever alter its good name and reputation. Generally these events come as a bolt out of the blue. The damage is not simply confined to a product or some fleeting adverse publicity. There is real damage, probably permanent damage, to the company, nonprofit or academic institutions name, reputation, public trust and brand image.

This is the type of catastrophe that is the worst nightmare of any executive. Reputational risk is often difficult to recognize or identify, but a companys good name and brand image are indeed very fragile. Unfortunately, in todays 24/7 media climate, the potential to generate adverse publicity is everywhere and the effects of an incident can be very long-lasting or even spell the demise of the organization.

This is intended to be a primer on the nature of reputational risk and subsequent articles will detail the steps every organization can take to reduce the potential for a reputational crisis and deal successfully when a crisis does occur. Anyone who uses Tylenol will know that a serious crisis does not mean that the company will implode. Tylenol survived because its management understood how to effectively deal with a reputational crisis.

What's Reputational Risk all about?

Organizations of all kinds, businesses, nonprofits and academic institutions can be irreparably harmed if their good name and image is no longer trusted by the public. The brand of their product/service can be permanently damaged by allegations of contamination, fraud or inability to deliver goods and services to customers. This is equally true of celebrities, be they sports, entertainment or political in nature.

Why should anyone care about reputational risk?

In todays business environment, catastrophic damage to an organizations brand and image can cause it to implode. The former Big 5 accounting firm, Arthur Andersen, was seemingly gone in a puff of smoke once they were indicted by federal prosecutors for their role in the Enron collapse. Arthur Andersens clients, many of which were large corporations, simply were not willing to be associated with an accounting firm that was accused of facilitating fraud.

Who should care?

Executives, board members and trusted advisors to businesses, nonprofits and academic organizations have a need to know. This information will help executives within these organizations as well as members of the board, IT professionals, public relations professionals, insurance professionals, financial professionals and attorneys. In short, anyone who is in a position to protect the organizations good name and public trust.

What you need to know.

* Solutions and techniques to deal with reputational risk can be readily scaled and adjusted to meet the needs of your organization. Size does not matter, you can scale the recommendations to fit your organizational needs.

* Todays companies, nonprofits and academic institutions have very similar business models that stretch across operational, managerial and governance areas. Lessons learned from experiences in the nonprofit and academic world have applicability in the business world as well.

* All organizations are highly dependent on technology to the point that a serious interruption or compromise in this area can have catastrophic consequences for the organization. Similarly, use of technology as a means of communication including the internet, email, text messaging, cell phones, Blackberries, iPhones, iPods, Twitter, Facebook and the like are mainstream in today's business, nonprofit and academic environments.

The Bottom Line.

It is not a question of if but when an event occurs that has implications for your organizations reputation. Having a plan in place that everyone knows about and knows what to do and what NOT to do is essential for getting through the situation.

Your company, school or nonprofits reputation is its most valuable asset. The value of your stock, access to capital, donations, strategic alliances and other intangible but indispensable elements all hinge upon the quality of the organizations reputation and good name. Do not let your organization be damaged because of a reputational crisis!