Reputation damage tops the lists of fears

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May 01, 2015

Reputation damage tops the lists of fears

The Global Risk Management Survey by AON is out for 2015. I always look forward to learning what is keeping 1,400 global risk management professionals up at night. This year, damage to reputation/brand is number one, having moved up from number four one year earlier. The report lists several reasons why reputation harm is so high on the list of these professionals –“product recalls, data breaches, offensive language on apparel and in customer communication, fraud investigations, money laundering charges, inappropriate remarks or behavior by company executives, and supply chain disruptions.” That is a whole host of high profile reputation risks that befell organizations in the past year and are probably boosting concern around reputation loss. The fact that reputation damage is now #1 and cyber risk has now moved into the top 10 risk list is no coincidence. We have seen several major Fortune 500 companies lose reputational status in the past year due to data privacy issues and cyber hacking. The convergence of digital exposure and reputation could not be higher.

Several other interesting nuances:
  • The following industries listed reputation damage as their highest risk: aviation, banking, food processing, education, non-profit, real estate, telecommunications.
  • Reputation damage was the number one risk in every region except Europe where economic recovery/slowdown was top of mind.
  • In deeper analysis, AON found that four key business risks are strongly connected and can have “a multiplier effect on company valuation and ultimate survival” — reputation, failure to innovate, cyber risk and interdependency.
 In 2015, 56% of respondents said they were prepared for damage to their reputation. This figure is on par with one year earlier. However, that means that nearly 40% are ill-prepared for reputation disasters that might be coming their way. This is surprising to me considering how many companies dislike being in the headlines and under intense social media scrutiny. One would think that those 4 out of 10 unprepared companies would be making themselves bullet-proof after seeing their competitors hit the wall. In a post I wrote on LinkedIn, we wrote about this year’s stumble rate. We found that over 3 in 10 companies lost their most admired status in their industries in 2014. Reputation stumbles and its consequences are all around us. Although the reputation stumble rate is lower than it was five years ago, it is still high and should be ringing the alarm bells or at least scaring more CEOs.
Interestingly, respondents were fairly optimistic that they would be prepared for any reputation harm three years from now. When they were asked about projected risks in 2018, the top three risks they expect to confront are increasing competition, economic slowdown and regulatory/legislative changes. Damage to reputation falls to #5. It remains to be seen if companies can better escape the reputation gallows in 2018 than they are now.
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Leslie Gaines-Ross
Leslie Gaines-Ross
lesliegainesross@gmail.com

As Weber Shandwick’s Chief Reputation Strategist, I focus on the ever changing world of reputation. For the past 25 years, I have relentlessly observed, researched and commented on the rise and fall of reputations.

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