Building Competence in Reputation Risk Management

Transcription

1 Building Competence in Reputation Risk Management PRSA International Conference 16 October 2012 Linda Locke, Reputare Consulting

2 What keeps you up at night? 2

3 What keeps your board up at night? Reputational risk a top concern for boards 63% of directors see reputational risk as top concern and concerns are growing Primary concerns cover product quality, liability, customer satisfaction Secondary concerns: integrity, fraud, ethics Three-fourths of directors seek broad-based risk assessment and they want to know more Third Annual Board of Directors Survey Concerns About Risks Confronting Boards EisnerAmper 3

4 They see what is happening to others Scraps debit card fee after consumer backlash Penn State abuse scandal chilling in details FedEx vows to track down delivery man who tossed computer monitor over fence Komen Foundation In Contortions Over Justifying Planned Parenthood Decision 4

5 There is no reason to be surprised by reputation risk in 2012 Bank of America Komen Foundation 5

6 If we are surprised by stakeholder reaction to major decisions - it means we aren t doing our jobs. 6

7 Why are we surprised? Risk is predictable, if. You know your stakeholders You understand what drives their perceptions You are aware of their values You listen to them 11

8 Why are we surprised? Risk is manageable, if. You know what your stakeholders are feeling The level of emotion related to issues, events, topics You can track its trajectory You know how to address stakeholder concerns 12

9 In a volatile world companies must prepare differently than in the past Stakeholders demand Stakeholders demand resiliency: resiliency: - Strength, flexibility - Swift Strength recovery - Adaptability Flexibility Adaptability 9

10 Resiliency: The ability to adapt to a continuously changing environment Two sides of risk resiliency: Preventing conditions of risk Managing consequences of events Source Carnegie Mellon Software Engineering Institute Outcome: You will have greater value to the organization 10

11 Risk/crisis management/business continuity owned by the company Risk Assessment (RA) and Security Business Impact Analysis (BIA) IT Operations Business Continuity Business Continuity Disaster Recovery (BC/DR) Operational Resiliency Model 11

12 but reputation is owned by stakeholders Reputation = judgments and perceptions of others Customers Suppliers Investors Advocacy groups Regulators Policymakers General public 12

13 Stakeholders perceptions develop via three channels Direct experience with the company What others say about the company (online and off) What the company says about itself (marketing, PR, exec comments, etc.) Photo: mack2happy 13

14 A resilient organization manages both operational AND reputation risk Operational Resiliency Ability to manage risks and function/adapt throughout the lifecycle of disruptions Reputational Resiliency Ability to maintain good stakeholder perceptions and supportive behavior through disruption Reputational Resiliency In tune with changing stakeholder perceptions Willingness to consider implications for business strategy Enterprise-wide reputation competence 14

15 Positive reputation yields measurable value A company highly regarded by its stakeholders is more likely to enjoy: - Strong brand loyalty - Returning high value customers - Lower employee turnover - Easier recruitment of high-caliber employees - Higher investor confidence - Positive regulatory environment - Lower costs of capital 15

16 The risk: Negative reputation exacts a measurable penalty A company viewed with distrust and outrage by its stakeholders is more likely to suffer: - Increased customer churn - Elevated customer acquisition costs - Higher employee training costs - Regulatory constraints - Increased cost of capital - Lower investor confidence - Increased vulnerability to competitors 16

17 Why reputation matters to business Based on five factors: Financial stability Accounting conservatism Corporate integrity Transparency Sustainability v Provided by Trust Across America 17

18 Reputation penalty or advantage? BP Stock Price vs. DJIA: Chart: Yahoo! Finance 18

19 Reputation penalty or advantage? Apple Stock Price vs. DJIA: Chart: Yahoo! Finance 19

20 The trajectory of reputational crises Stakeholder experiences Corporate initiatives and messaging Third party conversations 20

21 Problem: Major gaps in reputation risk management for corporations Risk literacy not on reputation agenda Reputation literacy not on risk agenda 21

22 Most important job for a reputation manager Build enterprise-wide reputation competence 22

23 Reputation competency requires the right tools and perspective Data-driven insight Willingness to engage, act Balanced desire to protect revenue AND reputation Outside-in perspective Enterprise-wide understanding 24 x 7 monitoring 23

24 Reputation competence = greater value to the organization Help lines of business understand competitive risks and opportunities to protect reputation. Shape strategy to address drivers of reputation. Measure the impact of your response to a crisis to improve next time Escalate emerging risks to c-suite and board for shift in resources, strategy to mitigate risk Elevate the role of reputation management in the organization 24

25 Reputation competency = predicting time to recovery from a crisis Daily reputation fluctuation 25

26 Reputation competency means you bring strategic business insight 26

27 Align key business units 27

28 Enterprise-wide competence aligns organizational action 8

29 Pathway to enterprise-wide reputation competence, resiliency Enterprise risk management: Integrate reputation into risk reporting agenda Business continuity management: Incorporate reputation intelligence, mitigation into crisis practices 29

30 How the risk organizations handle reputation today They guess at reputation impact (1 = Critical, 5 = Low) 30

31 Bring insight into existing usiness processes Identify key risks; establish agenda Develop mitigation strategies Reputation resiliency for ERM Monitor; report to c-suite Build risk competency at strategic level 31

32 Integrating reputation resiliency into risk organizations Deliverables: Distinct reputation risk assessment Set baseline measurement Integrate reputation into reporting Opportunity: Define reputation resiliency for organization Expand view of risk to include non-market, nonoperational issues with impact to reputation Address broader issues of concern to Board 32

33 Outcome of ERM reputation process Defined organizational vocabulary for reputation Built culture of risk literacy Defined drivers of risk, priorities for strategy 33

34 Embed reputation intelligence into business continuity Risk Assessment (RA) and Business Impact Analysis (BIA) Business Continuity Governance Risk Assessment Business Continuity Disaster Recovery Business (BC/DR) Impact Analysis Business Continuity Disaster Recovery Crisis and Emergency Management 34

35 Transformed resiliency program Integrate reputation impact analyses into planning for disaster recovery Incorporate quantitative analysis of reputation impact Reputation Resiliency Enhance processes to include reputation risk monitoring Conduct exercises related to reputation risk scenarios 35

36 The right tactics are crucial for success 36

37 First step: Understand perceptions of all of your stakeholders 33

38 Diagnose what is upsetting them 34

39 Second: Systematically mine the information environment, competitively Subheads in bold 24 pt Text aligns at the top 24 pt Bullet text 36

40 Over time. Commercials Privacy Boat safety video 37

41 Topically 38

42 Looking for risk Banking Fees Consumer Debt 39

43 ... Know the influencers of your reputation, and their impact 40

44 ...And where you have strengths and weaknesses 42

45 Third: Understand the role of emotion and apply to business strategy 43

46 And communicate about the concerns stakeholders express Media Analytics 44

47 Cheat sheet for reputation competence, organizational resiliency Determine drivers for each group Identify emotions Map channels with impact Identify activities causing risk Identify link to business strategy Build internal competence Engage with stakeholders Communicate what matters 49

48 The ultimate goal of reputation risk competence Strong reputation Resiliency Strong revenue 48

49 Thank you. Linda Locke Twitter: Reputationista