What is reputation / reputation risk? What is a reputation risk?

Transcription

1 REPUTATION RISK 1

2 What is reputation / reputation risk? Reputation is : an intangible asset greater than brand offering premium value growth opportunities to shareholders sum total of all stakeholders experience Reputation risk : Reputation risk is the current and prospective impact on earnings and capital arising from negative public opinion which may affect an organization's ability to sell products and services or access capital or loan funds. What is a reputation risk? 2

3 Reputation Importance It takes twenty years to build a reputation and five minutes to destroy it. -Warren Buffet. well known Investor, businessman and philanthropist If I lost all of my factories and trucks but kept the name Coca-Cola, I could rebuild my business. If I lost my name, the business would collapse. -CEO, Coca-Cola 3

4 Corporate Reputation: Value drivers Long-term Financial Performance Client Service New Products New Services Pricing Corporate Governance Regulatory Compliance REPUTATION Stake holder s satisfaction / External factors / Social responsibilities Communication Disclosures Crisis management Human capital/talent culture Corporate ethical values

5 Importance of reputation a survey 85% of international firms consider brand their most important asset. tangible brand Respondents ranked loss of reputation their greatest risk. Source: Interbred /Citibank and Knight, RF & Pretty, DJ, Reputation & Value - the case of Corporate catastrophes

6 Reputation loss Impact - Example Financial sector : Case 1 Arthur Andersen co. fell almost entirely due to the damage to its reputation after Enron s scandal in Case 2 PWC India s reputation is almost lost due to Satyam s 7K crore scam 6

7 Reputation risk MFI s 7

8 MAJOR RISKS TO MICROFINANCE INSTITUTIONS Most risks of MFIs will fall under one of the following three categories: Financial Risks Credit risk Transaction risk Portfolio risk Liquidity risk Market risk Interest rate risk Foreign exchange risk Investment portfolio risk Operational Risks Transaction risk Human resources risk Information and technology risk Fraud (Integrity) risk Legal and Compliance risk Strategic Risks Governance risk Poor governance structure Reputation risk External Business risks Ineffective oversight Event risk 8

9 Strategies for Mitigating Reputation risks of MFI s

10 Strategies to reduce its exposure to Reputation risk of MFI s: Employer Branding: Uplifting your image by motivating your best assets your 'Employees Going beyond your boundaries building on a strong Community initiatives Making capital value of your reputation - effectively creating and generating shareholder value Crisis management from being reactive to being proactive A company s reputation is paramount to its success and survival. The challenge for organizations is to be able to build corporate credibility and renew public trust. 10

11 Employer Branding: Uplifting your image by motivating your best assets your 'Employees' Examining the risks involved within a disengaged workforce and actively planning a workforce retention strategy Enhancing recruitment, encouraging development and improving staff retention through a sustainable reputation Talent management - using successful employee engagement to generate and build on innovative strategies Communicating your business sustainability strategies for improved productivity and business results Branding your corporate legacy and reputation through your employees

12 Going beyond your boundaries building on a strong Community initiatives Aligning community initiative with business goals for effective management and sustainable reputation Strategically integrating and communicating business and society needs on basis of shared value and embedded business practices Shifting from a 'Cheque over the fence' attitude to responsible corporate community investments and propagation Social volunteering at all levels as a growing aspect of corporate engagement MFI s with a strong positive reputation can attract better staff and more clients and maintain customer loyalty 12

13 Making capital value of your reputation - effectively creating and generating shareholder value Analyzing the relationship between media exposure and the impact on your organization's market performance Strategic use of media to inform and educate the market, the industry and potentially the investor Sustaining your investors by maintaining your reputation strongly as a long term player Identifying specific reputation risks that pose as a potential threat to your relationships, market value, trust and credibility Reputation cannot be manufactured by an advertising agency or created by a PR firm. It is the result of ongoing interactions between a company and its key stakeholders, as well as communications among stakeholder groups.

14 Crisis management from being reactive to being proactive Preventing negative publicity from whistle blowers by keeping your staff informed at all levels of the crisis Pre-empting media reaction by effective public broadcasting of information Dealing with the increasingly diversified media being proactive even under attack Revamping and rebuilding your culture, structure and branding positively Redefining your corporate mission to building corporate credibility and renewing public trust Crises are unavoidable but can be optimally managed

15 Questions? 15

16 Thank You 16