History is littered with examples of businesses that have been struck by reputational risks—the Perrier water example is oft quoted in management training programmes.
Traditionally a focus on product quality and service has been the best defence as the reputation of a company has depended almost entirely on its products being seen as “best in class” and delivered with a high quality of service.
Whilst this is still an excellent strategy to defend against reputation risks, it does not address the risk of reputational damage caused by more insidious ways. Increasingly, for example, a corporate reputation can be adversely affected by corporate ethics or behavior – such as the treatment of suppliers or a company’s environmental credentials.
The “wrong” type of publicity, generated through unexpected social-media coverage, is increasingly regarded as one of the principle sources of reputational risk.
Identifying and mitigating these risks requires much more than just a focus on product and service delivery, it also requires a crystal clear understanding of the changing business environment and stakeholder expectations.
Companies also have to learn to come to terms with social media in other ways. As with every risk there is an upside – companies that learn to engage with social media in the right way can reap significant reputational benefits.
Guest blogger Jeremy Brooks is part of Willis’ Global Specialties Consulting Group, in London.