Reputation Worries All Around

the-one-percentReputation is often high on agendas these days.  Years ago, it was not usually number one but among the top three to five items that kept boards and CEOs up at night. This week someone sent me an issue of Operational Risk and Regulation and I quickly breezed through the table of contents online when I noticed that they had an article describing a risk survey among operational risk managers. This is not usually the typical stakeholder group I get asked about so I took a look at the various types of risks that were keeping them up at night or at least, stressed out during the day. Reputational damage was at the top of their top 10 list for 2013.  When I turned to the fuller description on reputational damage, the first sentence was quite boldly stated. "A good reputation has never been easier to lose -- though this may not be a problem for much of the financial sector, as it doesn't have one." I understand where the author is going with this statement but the financial sector does have a reputation, just not a particularly good one. A company or sector can have a good or bad reputation and in some cases, somewhere in between. Most every sector, person and organization has a reputation. And just as a company can lose reputation over night or in seconds, so can it begin the process of redeeming itself by beginning the process of being straightforward, transparent and communicative. The financial sector, like many others, has certainly been battered but it does not mean that it is not crawling back and trying to restore its credibility. If anything, the financial crisis of the past few years has taught the financial sector to be more humble and that might just be a good place to start.

 

KEY RISKS FOR OPERATIONAL RISK DEPARTMENTS

IN 2013

 

Reputational damage

83.2%

Failure to enforce internal controls

79.8

IT sabotage/cybercrime/cyberattacks

77.4

Complex fraud and abuse of customer data

73.4

Business continuity

66.0

Sanctions and AML compliance

57.2

Culture, incentives and compensation

46.8

Operational risks associated with emerging market operations

 

42.3

Political intervention

35.0

Epidemic/pandemic disease

16.2

Ordnance Survey, in association with Operational Risk & Regulation

 

Leadership Lessons On Preparedness

I am in a big believer in being prepared for reputational damage or crisis. My book on Corporate Reputation: 12 StepsTo Safeguarding and Recovering Reputation is all about learning from crisis and being ready for the next one.  As Weber Shandwick's most admired stumble rate declares, every company should plan on some reputational mishap or misstep in the future. Nearly four in 10 companies have lost reputational status in the past year. I just read an article sent to me about the National Preparedness Leadership Initiative at Harvard. The initiative's goal was to learn lessons from leaders who have faced crisis situations such as terrorist attackes (Israel, Madrid, London), natural disasters (Hurricane Katrina), health scares (pandemics), oil spills (Deepwater Horizon), etc.  One of the first lessons they uncovered applies to companies and institutions and is:

"...that bad leadership – much like smoking – is a public health risk factor. Whether in the aftermath of a terror attack or a natural disaster, we have seen that when leaders don’t perform well lives are lost and people abandoned."

And the second lesson is getting everyone on the same page so everyone can work quickly, effectively and efficiently on behalf of a common and shared goal. 

"Working together after a disaster requires forging bonds before a disaster." 

Third, and a powerful lesson for companies, is to "expect every citizen to participate."  Leaders have to listen no matter how soft or weak the signals are. And these early warning signs need to get to those who can act and whose job it is to protect reputation. Empowering employees is critical to averting reputational disaster. As the National Preparedness Leadership Initiative found, "citizen bystanders" can make all the difference as we saw with the shoe bomber and underwear bomber airline incidents of the past few years.

"We should regard these heroes as leaders in their own right."