Reputation Risk Takes Center Stage

A new report about reputation risk management was released this week by The Conference Board.  The report is based on the findings of The Conference Board Reputation Risk Research Working Group and a survey of 148 risk management executives of major corporations.

More than three quarters of the respondents to the survey said their companies are making a substantial effort to manage reputation risk (82 percent) and they have increased focus in this area over the last three years (81 percent).

Other key findings of the study:

• Reputation risk should be managed throughout the organization. Although communication is of critical importance in responding to a risk event, a company's reputation should be considered during the preparation and execution of strategy and new projects, which hasn't been the case in most companies.


• Reputation risk is often not incorporated into risk management. Only 49 percent of executives surveyed said that the management of reputation risk was highly integrated with their enterprise risk management (ERM) function or another risk oversight program.


• Assessing reputation risks is a top challenge. Fifty-nine percent indicated that assessing the perceptions and concerns of stakeholders was an extremely or very significant issue, making it the highest-ranked challenge.


• Media monitoring has become more sophisticated. Today, there are tools to assess whether coverage is positive, neutral or negative; the credibility of publications; the prominence of coverage, etc.


• Efforts are being made to quantify the value of reputation. A select group of companies is making progress in this area by working with specialist consulting firms to quantify the impact of reputation on share price.


• Social media are gaining influence, but most companies are ignoring them. Although consumers and investors are increasingly gathering information from blogs, online forums, and social networking sites, only 34 percent of the survey respondents said they extensively monitor such sites, and only 10 percent actively participated in them.

Given the speed and efficiency of today's modern communication and news infrastructure, reputation risk should be a serious concern for all companies.  As Warren Buffett said, "It takes 20 years to build a reputation and five minutes to ruin it."