Forbes Insight, on behalf of Deloitte – the international professional services firm, conducted a global reputation risk survey of more than 300 executives across the globe.
In the “2014 Global Survey on Reputation Risk: Reputation@Risk”, 87% of the companies rated reputation risk as ‘more important’ or ‘much more important’ that other strategic risks, while 88% revealed that they are focusing on managing reputation risk for their long term success, especially the financial services and technology companies.
”There’s been a recognition that with the increasing influence of social media and social media sites, as well as activist sites, issues can escalate very quickly. This can threaten your reputation more significantly than in the past. As a result, there’s more sensitivity to reputation risk in the context of those types of social developments and technology developments over the last five years.“ – Clayton Herbert, group chief risk officer for Suncorp Limited, a top insurance and financial services firm in Australia.
The survey also reveals some interesting drivers of reputation risk that are expected to remain top considerations in the future. Risks related to ethics and integrity, such as fraud, bribery and corruption, are leading the way. This is followed by security risks (physical and cyber) and product and service risks, such as risks related to health, safety and the environment.
The majority of the companies (81%) indicated customers as the key stakeholder when it comes to managing reputation risk, followed by regulators, senior executives, employees and investors.
How confident are the companies presented about their reputation?
More than 76% of the companies surveyed believe that their reputation is better than average, but only 19% awarded themselves an “A” grade for the ability to manage reputation risk. However, companies feel less confident when they need to confront risks that are ‘beyond their direct control’. Such risks include third-party or extended enterprise issues (47%), competitive attacks (44%) and hazard or other catastrophes (44%).
The survey also presented revenue and brand value loss as a key impact faced by 41% of the companies that have experienced reputation risk. Regulatory investigations were also highlighted by many companies, especially financial services, as a major concern.
The majority of the surveyed companies (57%) said that they will manage to place more emphasis on managing reputation risks. More than half of the companies plan to invest more resources in technology such as brand monitoring and analytical tools.
The survey concludes by mentioning the paramount importance of protecting a company’s reputation by integrating reputation risk into a company’s daily strategy, and investing in the right capabilities and technologies in order to manage problems proactively before they evolve into crises.
Enrique Alanis, chief risk officer for CEMEX, a prominent building materials company in Mexico, is quoted in the survey as saying: “CEMEX cannot afford to find out about a new risk, a reputation risk arising that day. We need to know about it beforehand. That’s why we have all of these process reviews in place. Because when you discover that something happened the same day, it will be very difficult to manage.”