REPUTATION AT RIsk - ACE Group

Healthcare0.2%Three steps to more effective reputationalrisk managementConcerns about poor employment conditionsaround Measure the world external perceptionsHeightened Reputational focus on risk fraud differs and corruption from other risk categoriesin foreign market subsidiariesin that it is defined by external perceptions.Difficulty keeping pace with regulatory changesA company can take steps to enhance its ownDifficulty managing product quality and/or workingreputation but it does not control it. Reputationpractices across extended supply chainsCorporate consists governance of a combination failures leading of to perceptions held byfinancialexternalor reportingstakeholders,irregularitiesincluding the public andAggressive tax avoidance/tax evasion in thebusiness communities environment at large, its customers, suppliers,Increasing politicians stakeholder and policymakers. and media scrutiny This reputation doesof business practicesnot always reflect reality. According to a 2007Concernsarticleaboutin thefailureHarvardto protectBusinesscustomer privacyReview, manyHigh-profile companies product suffer recall from incidents a “reputation-reality gap”.This can go either way of course – a companyIncreasing corporate social responsibilityexpectations may have a reputation that is either better orConcerns worse than about discrimination the underlying the workplace reality. 4Increased attention on executive compensationIt is therefore essential for companies tounderstand how external stakeholders perceivethem. There are now many best-practiceexamples of putting resources into enhancing thisknowledge. Among our respondents, nearly half saythey monitor and measure their reputation on anongoing basis. But this is an activity where manyadmit they struggle – just 25% of companies saythat they are very effective at measuring externalperceptions of their company (see chart 4).Monitoring external perceptions of the companycan be a complex and costly business. To do itproperly, companies need to invest in the staff,41resources and technology that are required. They36need to reach into the full range of channels wheretheir company may be being 25 discussed – in bothtraditional and social media – and they must25also take a global approach, tracking externalperceptions in different 22 markets, because thesecan vary widely. “Global reputation is very difficult21to assess and control,” says Mr Dennery of FERMA.21But there are some relatively simple steps that21any company can take to measure things moresystematically. This 20 might include directly testingthe perceptions of the general public as well as16important stakeholders (for example customers,employees, investors) 15 through surveys, forums andfocus groups. The PR industry provides services to14track positive and negative media coverage. Morerecently, the advent of powerful software to collectand analyse data on social media channels relatingto brand perceptions has created extremely powerfultools that companies can use to understand howtheir brand is perceived at any given time.It is clear that most companies are still developingthese tools, but some industries in the surveyseem to be more active on this issue. For example,almost half of services companies (46%) stronglyChart 4: How effective is your company at managing the following aspects of reputational risk?% who say they are very effectiveInstilling a culture of reputational risk managementthroughout the companyIdentifying threats to reputation46.8%51.1%Crisis managementPutting in place governance structures tomanage reputational risksEnsuring that reputational risks are managedacross the entire supply chainRestoring reputation following a risk eventQuantifying the financial impact of reputational riskMeasuring external perceptions of the company39.2%39.2%35.4%32.0%28.2%25.2%16