Reputation Risk Series – Part 3: Reputation Risk Management

by Antonius Alijoyo
Chairperson, ERMA

Managing Reputation Risk Series – Part 3: Reputation Risk Management While it is commonly acknowledged that reputation risk is difficult to manage, there is a consensus on the key elements of managing reputation risk:

• Understanding of stakeholders’ expectations, information requirements and perceptions of the organisation;
• Prompt and effective communication with all categories of stakeholder;
• Strong and consistent enforcement of controls on governance, business and legal compliance;
• Ensuring ethical practice throughout the supply chain;  establishment and continual updating of a business continuity and crisis management plan and the team required to support them;
• Continuous monitoring of threats to reputation;
• A clear vision: ‘what we stand for and are prepared to be held responsible for’;
• Clear values, supported by a code of conduct, setting out expected standards of behaviour;
• An open, trusting, supportive culture;
• A robust and dynamic risk management system which provides continuous monitoring of threats to reputation and early warning of developing issues;
• Organisational learning leading to corrective action where necessary;
• Reward and recognition systems which support organisational goals and values.

The first point is accomplished through identifying the parties with whom the company needs to relate to effectively in order to fulfil its business goals, and establishing an ongoing dialogue with them to clarify and update the expectations of each party.

Looking forward, businesses will clearly go a long way towards making a more resilient company if they both identify and address the potential impacts of risks to their reputation. In addition, reputation risk management can be developed as an opportunity where superior products and customers can increase market share at the expense of competitors. Reputation can be enhanced through the ‘emotional attachment’ that stakeholders have with the company. Those companies that address global warming issues, tackle waste and recycling, support third world producers and are socially responsible, will engender respect and trust.

Reputation risks – both up-side and down-side – must be managed in an integrated enterprise systemic approach, as there is no such thing as reputation risks – rather, all risks may impact on reputation. Thus the effective management of risks to reputation is sound ERM (enterprise risk management) and GCG (Good Corporate Governance), where all insiders are involved and outsiders’ interests are taken into account.

In this regards, managing reputation risk is therefore an essential part of the strategic role of the board of directors, who must take into account all stakeholders, whose perception of the organisation will determine its reputation, hence the trustmark of company which may sustain over generations.

Editor’s note:
The Reputation Risk Series is a three series article on reputation risk. For your reading convenience, we have divided the whole topic into several sub-topics that covers a specific area on reputation risk. To obtain a full understanding on the series focus, we strongly suggest that you read all parts of the series.