Linda Locke, Reputare Consulting
Building Competence in Reputation Risk Management
PRSA International Conference16 October 2012
What keeps you up at night?
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Problem: Major gaps in reputation risk management for corporations
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Reputation literacy not on risk agenda
Reputation literacy not on risk agenda
Risk literacy not on reputation agenda
Risk literacy not on reputation agenda
What keeps your board up at night?
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Reputational risk a top concern for boards
• 63% of directors see reputational risk as top concern…and concerns are growing
• Primary concerns cover product quality, liability, customer satisfaction
• Secondary concerns: integrity, fraud, ethics
• Three-fourths of directors seek broad-based risk assessment… and they want to know more
Third Annual Board of Directors Survey 2012 - Concerns About Risks Confronting Boards – EisnerAmp
They see what is happening to others
Scraps debit card fee after consumer backlash
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Penn State abuse scandal
chilling in details
FedEx vows to track down delivery man who tossed computer monitor over fence
Komen Foundation In Contortions Over Justifying Planned Parenthood
Decision
There is no reason to be surprised by reputation risk in 2012
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Bank of America Komen Foundation
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If we are surprised by stakeholder reaction to
major decisions -
it means we aren’t doing our jobs.
If we are surprised by stakeholder reaction to
major decisions -
it means we aren’t doing our jobs.
Risk can be predictable, IF…
• You know your stakeholders
• You understand what drives their perceptions
• You are aware of their values
• You listen to them
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Risk can be manageable, IF…
• You know what your stakeholders are feeling
• You understand the level of emotion related to issues, events, topics
• You can track its trajectory
• You are willing to engage and address stakeholder concerns
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In a volatile world companies must prepare differently than in the past
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Stakeholders demand
resiliency:
- Strength, flexibility- Swift recovery- Adaptability
Stakeholders demand
resiliency:
Strength
Flexibility
Adaptability
Stakeholders demand
resiliency:
Strength
Flexibility
Adaptability
Resiliency: The ability to adapt to a continuously changing environment
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• Two sides of risk resiliency:
Preventing conditions of risk
Managing consequences of events
Source – Carnegie Mellon Software Engineering Institute
Outcome: You will have greater value to the organization
Risk Assessment (RA) and Business Impact Analysis (BIA)
Business Continuity Disaster Recovery
(BC/DR)Operational Resiliency ModelOperational Resiliency Model
Business ContinuityBusiness ContinuityIT OperationsIT OperationsSecuritySecurity
Risk/crisis management/business continuity “owned” by the company…
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How the risk organizations handle reputation today
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They guess at reputation impact They guess at reputation impact
…but reputation is “owned” by stakeholders
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• Customers
• Suppliers
• Investors
• Advocacy groups
• Regulators
• Policymakers
• General public
Reputation = judgments and perceptions of others
Stakeholders’ perceptions develop via three channels
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• Direct experience with the company
• What others say about the company (online and off)
• What the company says about itself (marketing, PR, exec comments, etc.)
Photo: mack2happy
A resilient organization manages both operational AND reputation risk
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The ResilientOrganization
• In tune with changing stakeholder perceptions
• Willingness to consider implications for business strategy
• Enterprise-wide reputation competence
The ResilientOrganization
• In tune with changing stakeholder perceptions
• Willingness to consider implications for business strategy
• Enterprise-wide reputation competence
Operational Resiliency Ability to manage risks
and adapt throughout the lifecycle of disruptions to
protect revenue
Reputational ResiliencyAbility to maintain good stakeholder perceptions and supportive behavior
through disruption
Operational Resiliency Ability to manage risks
and adapt throughout the lifecycle of disruptions to
protect revenue
Reputational ResiliencyAbility to maintain good stakeholder perceptions and supportive behavior
through disruption
Positive reputation yields measurable value
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- Strong brand loyalty
- Returning high value customers
- Lower employee turnover
- Easier recruitment of high-caliber employees
- Higher investor confidence
- Positive regulatory environment
- Lower costs of capital
A company highly regarded by its stakeholders is more likely to enjoy:
The risk: Negative reputation exacts a measurable penalty
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- Increased customer churn- Elevated customer acquisition costs- Higher employee training costs
- Regulatory constraints- Increased cost of capital- Lower investor confidence- Increased vulnerability to competitors
A company viewed with distrust and outrage by its stakeholders is more likely to suffer:
Why reputation matters to business
v
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Provided by Trust Across America
Based on five factors:Financial stabilityAccounting conservatismCorporate integrityTransparencySustainability
Reputation penalty or advantage?
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BP Stock Price vs. DJIA: 2007-2012
20 Chart: Yahoo!
Finance
Reputation penalty or advantage?
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Finance
Apple Stock Price vs. DJIA: 2007-2012
The trajectory of reputational crises
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Corporate initiatives and messaging
Stakeholder experiences
Third party conversations
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Most important job for a reputation manager
Build
enterprise-wide
reputation
competence
Build
enterprise-wide
reputation
competence
Reputation competency requires the right tools and perspective
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Data-driven insight
Data-driven insight
24 x 7 monitoring
24 x 7 monitoring
Outside-in perspectiveOutside-in
perspectiveWillingness to engage, act
Willingness to engage, act
Enterprise-wide understanding
Enterprise-wide understanding
Balanced desire to protect revenue
AND reputation
Reputation competence = greater value to the organization
• Help lines of business understand competitive risks – and opportunities – to protect reputation.
• Shape strategy to address drivers of reputation.
• Measure the impact of your response to a crisis – to improve next time
• Escalate emerging risks to c-suite and board for shift in resources, strategy to mitigate risk
• Elevate the role of reputation management in the organization
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Reputation competency = predicting time to recovery from a crisis
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Daily reputation fluctuationDaily reputation fluctuation
Reputation competency means you bring strategic business insight
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Enterprise-wide competence aligns organizational action
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Pathway to enterprise-wide reputation competence, resiliency
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Enterprise risk management:
Integrate reputation into risk reporting
agenda
Enterprise risk management:
Integrate reputation into risk reporting
agenda
Business continuity management:
Incorporate reputation intelligence, mitigation
into crisis practices
Business continuity management:
Incorporate reputation intelligence, mitigation
into crisis practices
Bring insight into existing usiness processes
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Reputation resiliencyfor ERM
Reputation resiliencyfor ERM
Develop mitigation strategies
Develop mitigation strategies
Identify key risks; establish agenda
Identify key risks; establish agenda
Monitor; report to
c-suite
Monitor; report to
c-suite
Build risk competency at strategic level
Build risk competency at strategic level
Integrating reputation resiliencyinto risk organizations
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Deliverables:• Distinct reputation risk assessment• Set baseline measurement• Integrate reputation into reporting
Deliverables:• Distinct reputation risk assessment• Set baseline measurement• Integrate reputation into reporting
Opportunity:
• Define reputation resiliency for organization
• Expand view of risk to include non-market, non-operational issues with impact to reputation
• Address broader issues of concern to Board
Opportunity:
• Define reputation resiliency for organization
• Expand view of risk to include non-market, non-operational issues with impact to reputation
• Address broader issues of concern to Board
Outcome of ERM reputation process
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Defined organizational vocabulary for reputationDefined organizational vocabulary for reputation
Built culture of risk literacyBuilt culture of risk literacy
Defined drivers of risk, priorities for strategyDefined drivers of risk, priorities for strategy
Embed reputation intelligence into business continuity
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Risk Assessment (RA) and Business Impact Analysis (BIA)
Business Continuity Disaster Recovery
(BC/DR)
Business Continuity GovernanceBusiness Continuity Governance
Crisis and Emergency
Management
Crisis and Emergency
Management
Business Continuity
Disaster Recovery
Business Continuity
Disaster Recovery
Risk Assessment
Business
Impact Analysis
Risk Assessment
Business
Impact Analysis
Transformed resiliency program
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Reputation Resiliency Reputation Resiliency
Incorporatequantitativeanalysis ofreputation
impact
Incorporatequantitativeanalysis ofreputation
impact
Integrate reputation impactanalyses into planning for
disaster recovery
Integrate reputation impactanalyses into planning for
disaster recovery
Enhanceprocesses to include
reputation riskmonitoring
Enhanceprocesses to include
reputation riskmonitoring
Conduct exercises related to reputation risk scenariosConduct exercises related to reputation risk scenarios
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The
right tactics
are crucial
for success
The
right tactics
are crucial
for success
First step: Understand perceptions of all of your stakeholders …
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…Diagnose what is upsetting them…
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Second: Systematically mine the information environment, competitively…
Subheads in bold 24 pt
Text aligns at the top 24 pt• Bullet text
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…Over time….
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Commercials
Privacy Boat safety video
…Topically…
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…Looking for risk…
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Banking Fees
Consumer Debt
... Know the influencers of your reputation, and their impact …
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...And where you have strengths and weaknesses
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Third: Understand the role of emotion and apply to business strategy…
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…And communicate about the concerns stakeholders express…
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Media Analytics
Cheat sheet for reputation competence, organizational resiliency
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•Determine drivers for each group
•Identify emotions
•Map channels with impact
•Identify activities causing risk
•Identify link to business strategy
•Build internal competence
•Engage with stakeholders
•Communicate what matters
The ultimate goal of reputation risk competence
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Resiliency
Questions?
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We help you understand why people don’t trust your company, and what you should do about it.
Corporate reputation consulting
Strategy
Measurement
Internal Alignment
Issues Management
External Engagement
Strategic Communications
Crisis Planning, Management
Linda Locke
+1 314 435 3428
Twitter: Reputationista
Thank you.