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Companies unprepared against reputation risk

A global survey has revealed only 19 per cent of companies believe they are capable of managing reputation risk.

The 2014 Reputation at Risk survey, conducted by Forbes Insights on behalf of Deloitte Touche Tohmatsu Limited (DTTL), found four in five companies would not award themselves an “A” grade regarding reputation risk management. However, 76 per cent said they were confident their reputations were strong.

The findings, sourced from a survey of more than 300 executives, highlighted the need for companies to invest in risk management programs.

39 per cent of companies classified the maturity of their reputation risk management programs as either average or below average, even with revenue (41 per cent) and loss of brand value (41 per cent) considered by companies to be the areas most impacted by negative reputation.

“Companies are concerned about the consequential effects that escalating reputational issues can have,” Henry Ristuccia, global Governance, Risk and Compliance leader, DTTL, said in a press release.

“Both internal and external stakeholders, including regulators, shareholders, employees, and customers, maintain a powerful foothold in a company’s overall brand value. Utilizing technology—such as analytics and brand monitoring tools—to proactively manage these relationships and mitigate reputational risks is critical to a company’s success.”

Issues relating to ethics and integrity (55 per cent) were found to be the highest drivers of reputation risk, followed by physical and cyber security risks (45 per cent), and service risks (43 per cent).

81 per cent of companies considered customers to be the most important stakeholders for managing reputation risk, followed by regulators (73 per cent), employees (68 per cent), senior executives (68 per cent), and investors (65 per cent).

“It is difficult to quantify the loss that companies face during a negative reputational event,” Ristuccia said. “However, recent history has shown that an issue can take on a life of its own, not only bleeding into other aspects of a company’s operations, with significant financial ramifications and brand value loss, but a shift in an entire industry, with investigations and increased regulations.”

Guillermo Troncoso
Guillermo is an editor with a background in business journalism and online media. Guillermo is embracing the opportunity to contribute articles to Dynamic Business and Money in Business’ large and loyal following with a plethora of informative and relevant content. A self-titled film buff in his spare time, Guillermo loves nothing more than enjoying a good movie. Follow him on Twitter.