Reputation is a risk businesses cannot afford to ignore

Conall McDevitt April 11, 2023 09:13

We have seen the rise and fall of different organisations and persons in the last year - Adidas, Credit Suisse, Meta, Silicon Valley Bank, Sam Bankman-Fried, Elon Musk and Kanye West - are just some examples of entities who have taken a hit to their reputations.

Yet, this trend is not new. History has thrown up many examples of reputational crises - from political scandals to corporate missteps.

In a 2015 Deloitte Survey, 87 percent of the executives surveyed rated reputation risk as “more important” or “much more important,” with 88 percent explicitly focusing on reputation risk as a key business challenge. Eight years later, this is still a priority for businesses all over the world.

Reputation, be it personal or professional, is one of the hardest assets for anybody to maintain with consistent effort. Elon Musk who was once revered for his entrepreneurial vision is now viewed in a more negative lens by many, given the events surrounding his takeover of Twitter - showing how vulnerable a company’s or leader’s reputation and the ripple effects spokespeople can cause.

So if you are a leader of an organisation - why should you be paying more close attention to reputation risks now more than ever? For one, there is an expectation for companies and brands to meet ethical commitments that are honoured continuously, with high scrutiny on the actions of CEOs and company management.

Phishing is not in season - be cybersecure

Technology is another factor that has exacerbated the threat reputation risk poses. For example, with social media, the amplification of such risks is wider today than in the past - which makes it even more important that organisations and leaders take reputation management seriously.

Moreover, post-pandemic, many companies have transitioned to software and platforms that create connections while enhancing operations. More meetings are held on Zoom and Google Meets.

There have also been continuous advancements to improve employee productivity, like Microsoft’s recent inclusion of Artificial Intelligence (AI) and ChatGPT into its Office365 offering.

However, this sets a company up for more risk of data breaches and cybersecurity threats. If one analyses the cybersecurity breaches occurring the last two to three years, they all follow the same trajectory: The affected organisation suffers financial loss, reputational damage, and likely sees a drop in customer numbers and even stock value, causing further financial harm.

Therefore, managing reputation and cyber risk are inextricably linked. With the proliferation of digitalisation and technology into more areas of our lives, the impact that cybersecurity issues have on reputation will only escalate.

Overseas Chinese Banking Corporation (OCBC) had faced such a struggle in December 2021, where 790 of their own customers had fallen victim to phishing scams. This resulted in a total financial loss of US$240 million in operations, regulatory capital and payouts to customers. This financial loss of course does not take into account the reputational costs OCBC had to incur as a result of these scams and the loss of trust from existing and new clients.

According to Ping Identity, a US-based identity intelligence firm, 81 percent of survey respondents would stop engaging with a brand following a cyber attack. WIth this in mind, companies need to consider various methods to curb cyber threats that could affect organisation reputation and stakeholders - be it routine internal cybersecurity audits and training.

Diversity, Equity and Inclusion (DEI) is more than fancy jargon

The harm to reputation can come internally too and not just from external sources.
For example, the adoption of preferred pronouns and employee ethnic diversity has gained traction in the workplace, but executives are still responsible for ensuring that all aspects of a company align ethically as one mistake out of oblivion can cost your reputation.

Take Mailchimp’s Ben Chestnut - the company’s CEO for 21 years, stepping down shortly after a controversy arising over an internal staff address on the introduction of preferred pronouns in the workplace.

Having good DEI policies in the workplace enforces good people management, creating an environment where individuals of differing cultures can come together and feel safe and empowered to achieve their full potential.

Company stakeholders want to understand the organisation’s purpose and values. Recognising the importance of diversity, equity, and inclusion, and clearly communicating that importance is a critical element to building trust and a strong reputation.

Adobe Summit’s 2022 Trust Report revealed that 80 percent of people felt that if a business wants to earn the trust of its employees, it must, first and foremost, practise what they preach.

Companies should enforce DEI training for upper management, who are principal representatives of a company. Such training helps pinpoint areas of improvement for managers that can benefit a company financially, while increasing employee commitment, productivity and mental health.

Misinformation is more than a chain message

Although misinformation has been around for centuries, social media’s growing influence and presence in our lives has brought it to the foreground. A small untruth or unfactual story can gain traction in a very short amount of time. Even if it is eventually proved to be false, the reputational damage it caused is difficult to undo.

A 2022 Study conducted by the Pew Research Center revealed that 26 percent of US adults under 30 regularly get their news on TikTok, leaving younger, more impressionable adults in the hands of potentially prejudiced or uninformed content creators.

The rise of wokeism and cancel culture also plays a huge role in misinformation. With public online platforms being free-for-all, a company’s online presence is under heavy scrutiny and is continuously at risk of being on the wrong side of public perception.

Information gets circulated swiftly on the internet, and might possibly misconstrue public opinions made by an organisation. A once-honest business may transition into an enemy of the public in the matter of seconds, placing emphasis on creating a well grounded persona on all digital platforms.

Keeping an eye out on insights would also contribute to sentiment analysis and lower misinformation that could damage reputation, essential for all businesses who need to improve their reputation as stakeholders to have a better understanding of how they are being perceived. Sentiment analysis also allows companies to readjust their strategy and branding to have a higher appeal with the audience.

In a report from Deloitte discussing the strengthening of critical competencies within a company, 58 percent of corporate affairs directors interviewed had indicated data and insights as their number-one competency to strengthen.

Companies need to equip publicity personnel with the proper analytics and tools in order to be aligned with good digital marketing practices that lowers the risk of online reputational damage.

Reputation is a valid buzz word

Reputation is an issue that defines a successful company, and should be a priority to maintain. A great brand may take 20 years to build but minutes to destroy. Understanding the areas of reputational risk helps prevent potential public relation crisis, giving the business more energy to focus on development and growth.

In today’s digital world, a company’s reputation does not solely exist in the real world, but is indented forever online - in search engines, social media platforms, online forums and news sites. With newer outlets and platforms of connectivity, companies need to be conscientious about their presence in the digital world to maintain a consistent reputation in its entirety.

Most organisational information is also publicly available on the internet, making the digital platforms the very first touchpoint any stakeholder will engage with the brand. Reputational risk now moves to the forefront of most companies, making it imperative for them to analyse its current identity online, offline and internally.

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Conall McDevitt

Managing Partner of Europe and Asia for the Penta Group