score environmental breaches as a minor threat to reputation—but, as would be expected, give it more emphasis than financial sector respondents.
Do these conclusions support the proposition that reputational risk management is an issue distinct from simply ensuring that the first-tier risks are properly covered? Only to a point. Although first-tier risk issues predominate in the list, a couple with a more direct impact on reputation are prominent among managers’ concerns. On the one hand, the importance of being perceived as ethical, in particular, is arguably more a reputational issue than one of fundamental risk management. On the other, one of the issues most closely associated in the public mind with reputational standing, being seen to address issues of public concern such as climate change, is relegated to the bottom of the list of priorities.
To what extent are the following actions a source of reputational risk for your organisation? (% respondents)
Non-compliance with regulation/legal obligations
Exposure of unethical practices
Security breaches (eg, sensitive data leaks, hacking of customer financial data)
Failure to deliver minimum standards of service and product quality to customers
Poor crisis management
Failure to hit financial performance targets
Risk by association with suppliers, partners, alliances, etc with poor reputations
Failure to address issues of public concern pro-actively (eg, climate change)
Environmental breaches 14
Labour unrest 11
9 Source: Economist Intelligence Unit, 2005
Reputation: Risk of risks
How are we doing?
Reputation is a dynamic asset, changing as organisations present new services and products in new markets, being held to changing criteria and facing unforeseen challenges. This suggests that there is a role for risk managers both in maintaining and protecting the organisation’s standing with its stakeholders, and in repairing its good name when events conspire to damage it (see box: How to manage a crisis).
It is the latter that receives most attention from risk managers, with 64% of respondents saying they plan and document processes for crisis management. However, monitoring perceptions also figures prominently, with 53% reporting that external perceptions of the company are regularly measured. Once again, in the vein of preparation and early warning, 50% train their employees to identify and manage reputational risks (a low number, considering the prominence all respondents give to the issue) and 47% systematically track reputational threats.
The most revealing split in these responses is according to the size of the organisation. Not surprisingly, there is a general trend for those with more revenue to undertake a greater number of these activities: 80% of respondents from organisations posting revenue in excess of US$10bn have implemented processes for crisis management, compared with just 53% for sub-US$1bn companies (although in both cases this is the most widely employed strategy).
Monitoring outside perceptions of the organisation appears to be something of a luxury, with 61% of the bigger organisations carrying this out, compared with 51% of the smaller organisations. GE Healthcare is one such company, large in its own right but also a subsidiary of a true global giant. This is reflected in the breadth of its efforts to monitor and manage stakeholder perceptions. “We monitor how the
© The Economist Intelligence Unit 2005