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Reputation: Risk of risks

© The Economist Intelligence Unit 2005

Conclusion

Opinion is divided as to whether reputational risk is a category of risk in its own right, or merely the consequence of a failure to manage first-tier risks. Whatever position companies take on this, almost all executives agree that corporate reputation is a hugely valuable asset that needs to be protected. It is also clear that serious reputational damage can occur simply as a result of perceived failures, even if those perceptions are not grounded in fact. Understanding how different aspects of an organisation’s activities impinge on stakeholder perceptions is therefore a vital aspect of protecting a company’s reputation.

There are three distinct tasks to managing reputational risk: establishing reputation to begin with, maintaining it through the rough and tumble of business operations, and restoring it when it has been damaged. The latter two, especially, call for very different actions (and actors). Whereas establishing and maintaining reputation may be considered a matter of successful risk control in other areas, reputational repair clearly cannot.

Reputational risk can arise from almost any business failure. As such, it is too important and wide- ranging to belong to any individual or department. The CEO plays the vital co-ordinating role, but must also personify the values and conduct that ensure a company’s good standing. Other members of the

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