Implementing Risk Management To Manage Enterprise Reputation

Reputation is an impalpable, magnetic and powerful asset and yet it is so fragile. Any minor breach in the regulation or behavior of the enterprise may harm the goodwill or reputation directly impacting the business. A dynamic Enterprise Risk Management framework can mitigate the risks and protect the reputation of the organization.

Aftermath the financial crises of 2007-2008 and the recent lawsuits against the world's most reputed brands sparked by the social media coverage has revealed the value of aligning with the technology, governance, regulation and quality compliances. Research has revealed that reputation is the second most concern of the organizations after quality when measuring risk.
A standard delivery of products and services meeting the customer expectations is the key to build reputation, which drives growth and profits for the organization. At the same time it is necessary to save your organization from potential threats that can destroy your goodwill and the trust among them.

It is better to go beyond the traditional approaches of assessing and comparing the risk and assess both risks and its impact. This helps in exploring the connections between the reputation and the ability of the organization to market to customers and communicate with stakeholders. The reputation risk managers must try to provide and interpret data that will determine how reputation risk can be minimized, and reputation impact can be maximized.

Elements of Reputation Risk

Some of the quarters of reputation risks are:

• Quality Compromise
• Data Breach
• Poor quality communication
• Negligent hiring or retention
• Occupational fraud 
• Inspecting third parties 
• Shortfall in financial performance
• Labour unrest
• Corporate governance & leadership
• Corporate Social responsibility

If managed well these elements can surely bolster the organization's reputation. A business needs to consider all these risks within the extended enterprise.

The damaged reputation may affect a number of aspects in the business like cost of capital, key stakeholders or the worst of all preference of the customer. It may also bring down the supplier's inclination to maintain partnership with the firm. It may escalate the competitor's desire to enter the market or may impact the media coverage for the organization, negatively.
The regulatory and control authority may change their attitude towards the company following a major breach in Governance, regulatory or quality compliance.

How to save the reputation?

The success of every executive is inevitably linked to the success of the organization. It is vital for every leader and executive to direct their efforts to reduce the reputation risk.

• Efficient board oversight
• Efficient communication and maintaining relation with the social media
• Implementation of risk-prevention strategies into the business planning
• Maintaining quality commitment
• Profitable market recognition

Adopt risk based compliance approach
Diagnose the potential threats to reputation: Identifying the potential threats to reputation breach like the non-compliance can solve the crises from the root. Determining the nature, source and the cause of the risk will make it easy to apply the risk management steps. Evaluating the attitude of the stakeholder is very important as they are the people whose decisions and support really matters when crises unfolds.

 

Prioritising risks of non-compliance
Prioritizing the non-compliance risks is importance so that the vital activities relating to the compliance can be manifested. The organization must adhere to the Governmental policies which in turn must be reflected to the policies and targets of the organization.

 

Identifying and selecting compliance measures
It is vital to identify and choose appropriate and most cost effective compliance measures that can give the maximum benefits. The organization must allocate sufficient resources to the greatest element of reputation risk.

The organizations must make their choices based on the velocity of the risk. An early anticipation and preparedness for a crises enhances the managers and risk managers towards an improved response to vulnerable areas of risk and the crises itself. The response should accentuate on transparency and effective communication strategy of the crises. The best option to prevent a situation of reputation crises is to through quality commitment, solid operational and technological focus and acceptance of the situation.

 

About the Author
Fadi Al-Khatib- is the Manager at CareWeb- a Corporate Governance Consultancy offering Governance, Risk & Compliance (GRC) software preferred by the well known business organizations including hospitals, manufacturing firms, governmental agencies and more for different purposes.