Building Competence in Reputation Risk Management
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This is a presentation I gave on Oct 16, 2012 at the Public Relations Society of America International Conference. Comments appreciated: linda.locke@reputareconsulting.com
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Building Competence in Reputation Risk Management
- 1. Building Competence in Reputation Risk Management PRSA International Conference 16 October 2012 Linda Locke, Reputare Consulting
- 2. What keeps you up at night? Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | October 2012 2
- 3. Problem: Major gaps in reputation risk management for corporations Risk literacy Risk literacy Reputation literacy Reputation literacy not on reputation agenda not on reputation agenda not on risk agenda not on risk agenda Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 3
- 4. 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 2012 - Concerns About Risks Confronting Boards – EisnerAmp Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 4
- 5. 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 Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 5
- 6. There is no reason to be surprised by reputation risk in 2012 Bank of America Komen Foundation Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 6
- 7. If we are surprised by If we are surprised by stakeholder reaction to stakeholder reaction to major decisions - major decisions - it means we aren’t doing it means we aren’t doing our jobs. our jobs. Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 7
- 8. Risk can be predictable, IF… • You know your stakeholders • You understand what drives their perceptions • You are aware of their values • You listen to them 11
- 9. Risk can be manageable, IF… • You know what your stakeholders are feeling • You understand the level of emotion related to issues, events, topics • You can track its trajectory • You are willing to engage and address stakeholder concerns 12
- 10. In a volatile world companies must prepare differently than in the past Stakeholders Stakeholders demand demand Stakeholders demand resiliency: resiliency: resiliency: - Strength, flexibility - Strength Swift recovery Strength - Adaptability Flexibility Flexibility Adaptability Adaptability Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 10
- 11. 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 Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 11
- 12. Risk/crisis management/business continuity “owned” by the company… Risk Assessment (RA) and Business Business Business Security Security IT Operations IT Operations Impact Analysis (BIA) Continuity Continuity Business Continuity Disaster Recovery (BC/DR) Operational Resiliency Model Operational Resiliency Model Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 12
- 13. How the risk organizations handle reputation today They guess at reputation impact They guess at reputation impact (1 = Critical, 5 = Low) Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 13
- 14. …but reputation is “owned” by stakeholders Reputation = judgments and perceptions of others • Customers • Suppliers • Investors • Advocacy groups • Regulators • Policymakers • General public Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 14
- 15. 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.) Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 Photo: mack2happy 15
- 16. A resilient organization manages both operational AND reputation risk The Resilient The Resilient Operational Resiliency Operational Resiliency Organization Organization Ability to manage risks Ability to manage risks and adapt throughout the and adapt throughout the lifecycle of disruptions to lifecycle of disruptions to •• In tune with changing In tune with changing protect revenue protect revenue stakeholder perceptions stakeholder perceptions Reputational Resiliency •• Willingness to consider Willingness to consider Reputational Resiliency Ability to maintain good Ability to maintain good implications for business implications for business stakeholder perceptions stakeholder perceptions strategy strategy and supportive behavior and supportive behavior •• Enterprise-wide Enterprise-wide through disruption through disruption reputation competence reputation competence Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 16
- 17. 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 Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 17
- 18. 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 Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 18
- 19. Why reputation matters to business Based on five factors: Financial stability vAccounting conservatism Corporate integrity Transparency Sustainability Provided by Trust Across America Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 19
- 20. Reputation penalty or advantage? BP Stock Price vs. DJIA: 2007-2012 Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 Chart: Yahoo! 20 Finance
- 21. Reputation penalty or advantage? Apple Stock Price vs. DJIA: 2007-2012 Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 Chart: Yahoo! 21 Finance
- 22. The trajectory of reputational crises Stakeholder experiences Corporate initiatives and messaging Third party conversations Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 22
- 23. Most important job for a reputation manager Build Build enterprise-wide enterprise-wide reputation reputation competence competence Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 23
- 24. Reputation competency requires the right tools and perspective Data-driven Data-driven insight insight Willingness to Willingness to Balanced desire Outside-in Outside-in engage, act engage, act to protect revenue perspective perspective AND reputation Enterprise-wide Enterprise-wide 24 x 7 24 x 7 understanding understanding monitoring monitoring Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 24
- 25. 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 Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 25
- 26. Reputation competency = predicting time to recovery from a crisis Daily reputation fluctuation Daily reputation fluctuation Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 26
- 27. Reputation competency means you bring strategic business insight Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 27
- 28. Enterprise-wide competence aligns organizational action 8
- 29. Pathway to enterprise-wide reputation competence, resiliency Enterprise risk Enterprise risk Business continuity Business continuity management: management: management: management: Integrate reputation Integrate reputation Incorporate reputation Incorporate reputation into risk reporting into risk reporting intelligence, mitigation intelligence, mitigation agenda agenda into crisis practices into crisis practices Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 29
- 30. Bring insight into existing usiness processes Identify key risks; Identify key risks; establish agenda establish agenda Develop Develop Monitor; Monitor; mitigation mitigation Reputation resiliency Reputation resiliency report to report to strategies strategies for ERM for ERM c-suite c-suite Build risk competency Build risk competency at strategic level at strategic level Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 30
- 31. Integrating reputation resiliency into risk organizations Deliverables: Deliverables: •• Distinct reputation risk assessment Distinct reputation risk assessment •• Set baseline measurement Set baseline measurement •• Integrate reputation into reporting Integrate reputation into reporting Opportunity: Opportunity: •• Define reputation resiliency for organization Define reputation resiliency for organization •• Expand view of risk to include non-market, non- Expand view of risk to include non-market, non- operational issues with impact to reputation operational issues with impact to reputation •• Address broader issues of concern to Board Address broader issues of concern to Board Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 31
- 32. Outcome of ERM reputation process Defined organizational vocabulary for reputation Defined organizational vocabulary for reputation Built culture of risk literacy Built culture of risk literacy Defined drivers of risk, priorities for strategy Defined drivers of risk, priorities for strategy Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 32
- 33. Embed reputation intelligence into business continuity Risk Assessment (RA) Business Continuity Governance Business Continuity Governance and Business Impact Analysis (BIA) Risk Assessment Risk Assessment Business Business Crisis and Crisis and Business Continuity Continuity Continuity Emergency Emergency Disaster Recovery (BC/DR) Management Management Business Business Disaster Disaster Impact Analysis Impact Analysis Recovery Recovery Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 33
- 34. Transformed resiliency program Integrate reputation impact Integrate reputation impact analyses into planning for analyses into planning for disaster recovery disaster recovery Incorporate Incorporate Enhance Enhance quantitative quantitative processes processes analysis of analysis of to include to include reputation reputation Reputation Resiliency Reputation Resiliency reputation risk reputation risk impact impact monitoring monitoring Conduct exercises related Conduct exercises related to reputation risk scenarios to reputation risk scenarios Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 34
- 35. The The right tactics right tactics are crucial are crucial for success for success Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 35
- 36. First step: Understand perceptions of all of your stakeholders … 33
- 37. …Diagnose what is upsetting them… 34
- 38. Second: Systematically mine the information environment, competitively… Subheads in bold 24 pt Text aligns at the top 24 pt • Bullet text 36
- 39. …Over time…. Commercials Privacy Boat safety video 37
- 40. …Topically… 38
- 41. …Looking for risk… Banking Fees Consumer Debt 39
- 42. ... Know the influencers of your reputation, and their impact … 40
- 43. ...And where you have strengths and weaknesses 42
- 44. Third: Understand the role of emotion and apply to business strategy… 43
- 45. …And communicate about the concerns stakeholders express… Media Analytics 44
- 46. Cheat sheet for reputation competence, organizational resiliency •Determine •Identify link to drivers for each business group strategy •Identify •Build internal emotions competence •Map channels •Engage with with impact stakeholders •Identify •Communicate activities what matters causing risk 49
- 47. The ultimate goal of reputation risk competence Resiliency Reputare Consulting LLC | PRSAIC: Building Competence in Reputation Risk Management | August 2012 47
- 48. Questions? 48
- 49. We help you understand why people don’t trust your company, and what you should do about it. Corporate reputation consulting Strategy Measurement Internal Alignment Issues Management External Engagement Strategic Communications Crisis Planning, Management
- 50. Thank you. Linda Locke +1 314 435 3428 Twitter: Reputationista
Editor's Notes
- The question is, why are companies surprised when these kind of disasters happen? And why do they appear to handle them so badly? The company ’s risk agenda is defined based on a limited risk profile with blinders to new emerging risks and potential impacts involving corporate reputation. Could Fedex have known its employee was going to throw a TV over a fence? Could BofA ’s have foreseen that its debit card fee would cause outrage across the company? Could Penn State predict the negative fallout from their situation? Could BP predicted the public ridicule it would receive over its handling of the Deepwater Horizon blowout? The answer is yes – these crisis situations should not have been a surprise – if the risk management process had the right focus (looking all types of potential risks) and the crisis management teams were prepared to respond quickly and effectively with the right tools.
- Risk Assessment Incorporate reputation risks Build reputation risk awareness for the business area Business Impact Analysis Enhance reputation impact analysis Provide meaningful reputation data
- [THIS COPY WAS MOVED TO #8] To ensure business resilience, companies are moving toward a risk management process that both addresses the myriad types of risk that functions across the organization face, and encompasses all facets of risk management, from its identification through to mitigation. Resilient organizations understand, measure and manage reputation We jump into resilient organizations here? We didn ’t explain resiliency yet. Have we made a good comparison of revenue vs. reputation in the previous slides? Are we saying Business. Resilience is a risk management process?
- Track growing concern levels for an issue, topic or product feature See the “unknown unknowns” and measure their potential impact Avoid concerns before they spiral out of control