Bangladesh Tragedies: Beyond Reputational Risk

Reuters: Bangladesh Garment Factory Disaster - rescue efforts

The series of tragic events over the past 6 months in the troubled Bangladeshi garment industry truly highlight the need for a thoughtful evaluation of brand risk, public relations strategy, corporate disaster / crisis management planning and flat-out business ethics in our increasingly shrinking global economy. Over 1,100 people died recently in a building not designed for industrial use with three apparently illegally added floors.  This follows the factory fire deaths of 7 in January and over 110 in November in other Bangladeshi garment factories.  Since then, 8 more deaths have occurred in Bangladesh factories and just yesterday 2 more were killed in a Cambodian shoe factory.

In each case, the labels and products of major European and North American global clothing brands were found in the rubble.  Some of the firms distance themselves from use of the Bangladeshi factories, where the $38 monthly wage supports the quick production of inexpensive fashion for a $1 trillion industry.  Other retailers step up, admit sourcing product there and vow better action going forward. Each strategy undoubtedly has its merits and issues from a public relations standpoint. My question is where does risk management come into the equation?

How risk managers and other corporate leaders with organizational responsibility for the brand and its value begin to get in front of this issue in meaningful way remains to be seen. Reputations, both corporate and personal, are built over a lifetime but can be lost in a moment.

Disaster as Catalyst for Change?

With reputational risk more and more at the forefront of overall enterprise risk management and corporate strategy, I am wondering when public perception of the truly horrible conditions in Bangladesh will outweigh the benefit of inexpensive production.

It took the Triangle Shirtwaist Factory fire in New York in 1911 to change workplace safety standards in the United States. Apparently the sight of teenage girls leaping to their deaths due to locked and insufficient fire escapes in front of crowds of New Yorkers was sufficient to drive change here and then.  Which future tragedy in Bangladesh will tank a retail brand and drive meaningful change there?

Risk Management Includes Prevention

Triangle Shirtwaist Factory Headline (LOC)

The New York Tribune’s front page after the 1911 Triangle Shirtwaist Factory fire. (Photo courtesy of the U.S. Library of Congress)

Strong risk management aligned with corporate values and business strategy works not only to manage the financial, supply-chain, and reputational risks of outsourcing, but also to proactively prevent disasters before they occur. Aligning loss control best practices into contracts and partnerships can help to ensure that your firm’s brand and reputation are protected regardless of where and who is producing your product.

When your label is on the smoldering goods left after a disaster, denial only plays so long. Global risk managers have the risk mitigation expertise, external and internal contacts and, perhaps most importantly, the responsibility within their firms to know exactly what needs to be done.  They need to deliver this expertise on this issue.

The insurance and risk industry in this case can be more than a business enabler smoothing financial hits post event; it can be a moral enabler as well.  Leveraging the multiple issues regarding brand protection, litigation prevention, supply chain safety, disaster recovery and public relations expenses, employee morale, stock price etc. under the macro headline of “major reputational risk” is on the table.  In that scenario, the reputation saved may very well be our own.

About George Haitsch

George is Executive Vice President and Practice Leader of Willis Global Solutions – North America, based in our N…
Categories: Global Risks | Tags: , ,

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