Reputational risk is both an old and new phenomenon. If you ask senior executives whether they worry about their business’s reputation, they always say yes; that’s the old part.
More and more, managing reputation risk is becoming a more complex endeavor; that’s the new part. Reputation risk management, however, is still often overlooked in the risk assessment process. That makes little sense. Your company’s reputation is delicate, and managing the risks surrounding it should always be a top priority.
In the current social media landscape – which won’t recede any time soon – reputational risks are at an all-time high. Therefore, effective reputational risk management is necessary to maintain a positive relationship with customers, maintain brand equity, and achieve strategic business objectives.
Why Is Reputational Risk Important?
Reputational risk is crucial because it can pose a swift and dire threat to your business. Ruined reputations scare away current and potential customers, reduce revenue and profits, drive away employees, and sow distrust among your company’s stakeholders.
Moreover, recovery from reputational risk can be difficult since the internet allows past incidents to remain easy to find, even years after the fact.
The consequences of reputational risk are not always immediate or easy to track. Minor incidents can do cumulative damage over time, or explode when a pattern of misbehavior suddenly appears. So it’s incredibly valuable to track and manage reputation risk as much as you can.
Reputational Risk Management Strategies
Broadly speaking, risk management has five main strategies.
- Avoidance: Avoid any areas or activities where a risk might occur.
- Retention: Retention means that the organization accepts the risk and understands that losses are inevitable.
- Sharing: Distribute the risk among multiple parties to reduce the losses for any single party.
- Transference: Transfer responsibility for risk to another party entirely (say, by taking out an insurance policy).
- Loss prevention: Accept the inevitability of the risk, but seek to minimize the potential loss and damage as much as possible.
Applying these traditional risk management strategies to reputational risk can be tricky. Reputation risk management is more challenging to pin down than most operational risks, and consequences can arise long after an incident occurs.
Insurance policies (a standard solution for most of the above strategies) aren’t available for your reputation. So, your best defenses against these risks are vigilance and preparedness.
Best Practices for Reputational Risk Management
Reputational risk is challenging to contain and can be unpredictable. There’s also no time limit on when a risk event could cause harm to your reputation down the line. Here are some best practices to consider.
Track Mentions and Conversations Surrounding Your Brand
Social media is a helpful tool to prevent reputational damage, control business risk, and minimize its effects. By paying attention to the comments on your posts and how users talk about your brand on Twitter, Instagram, and Facebook, you can maintain a real-time grasp of how your company is perceived.
Instill a Strong Ethics Program at Your Company
Develop a robust code of conduct for your organization and make those ethical values the core of your business planning. Strong ethics must be clearly practiced by senior management and the board of directors to be most effective.
While it’s impossible to avoid reputational risk entirely, you can prevent its effects by integrating ethics into your corporate practices and decision-making processes. It’s also essential to move swiftly when infractions of these values occur.
Hire Marketing and Public Relations Professionals
Positive brand building and unified messaging can be vital tactics in managing reputation risk. Investments in marketing and public relations initiatives can be an indispensable part of your crisis response team if your reputation takes a hit.
What Risks Do Third Parties Pose to My Organization?
Suppliers, vendors, stakeholders, and contractors can potentially harm your organization’s good reputation. While you may perform due diligence when entering a contract with a third party, these relationships can change over time. You may not be privy to personnel or policy changes within your business partners after the relationship begins.
Reputational damage by association is a real possibility. For example, celebrities or politicians who mention your brand can harm your reputation if they are viewed negatively by your customer base.
Include Third-Party Reputational Risk in Your Risk Assessment Strategy
Before building a relationship with an outside company, consider what reputational risks it may pose. As a part of the risk assessment and risk analysis, investigate the third party’s reputation and social media mentions. You may find nothing, but the risk is significant enough that it shouldn’t be ignored.
Besides avoiding third parties with questionable reputations, you also want to build business decisions and initiatives around working with companies with strong reputations. It’s good to surround yourself with other organizations that emphasize values such as corporate social responsibility.
Monitor Your Contractors and Vendors as Carefully as You Do Your Own Organization
Their names should be tracked, both on social media and through standard news outlets. You’ll want to be the first to know if their public image begins to sour.
Have a Plan in Place for Mitigating Third-Party Risks
Whatever trust you place in your vendors, it’s still wise to have contingency plans and be prepared to distance yourself from them if necessary. Your public relations and crisis management teams should also be prepared for handling negative press caused by third-party mentions.
Reduce Your Reputational Risk With ZenGRC
Strategic risk assessment of any kind is a challenging endeavor. ZenGRC is an easy-to-use platform that allows you to track your compliance and enterprise risk management, giving you more time to run your business.
Policies, risk assessments, and internal controls must be documented and updated regularly to assure they meet the evolving environment. With ZenGRC’s document repository, policies and procedures are revision-controlled and easy to find.
Workflow management features offer easy tracking, automated reminders, and audit trails. The ZenConnect feature enables integration with popular tools, such as Jira, ServiceNow, and Slack, assuring seamless adoption within your enterprise.
Insightful reporting and dashboards provide visibility to gaps and high-risk areas. By better understanding your risk landscape, you can take action to protect your business from cyberattacks, avoid costly data breaches, and monitor the risks posed by your vendors.
Schedule a demo and learn how ZenGRC can help your company succeed.