I have just finished reading the World Economic Forum’s Global Risks 2007 report – http://www.weforum.org/pdf/CSI/Global_Risks_2007.pdf

It makes for thought provoking reading. In it they list the 23 major risks that we face. What I did also find interesting was the reasons that they listed why organisations are not more proactive in mitigating risk.

The following is a list of common reactions to risk (Page 23), which prevent a proactive approach to risk mitigation:

• Someone else will manage my risk.
• The risk is not relevant to my organization.
• Won’t taking action just slow me down?
• No one is telling me that I must act.
• What reward do I get from mitigating risk?
• It is too costly to mitigate.
• Why worry about it?
• It could never happen to me.
• It is too large to manage, and success is not guaranteed.

The report then mentions that in the 2006 report, the Global Risk Network developed the idea of the “5 pathways” to mitigation. I have taken these pathways and have applied them to Reputation Risk so that you can achieve an understanding of where your reputation risk mitigation efforts should focus.

Pathway 1: Improving insight: moving risks from the unknown to the known through research. The best mitigation strategies often derive from the changed mindset which can result from enhanced knowledge and information.

Action required: Use your scissors and create a collage of all the transgressions, incidents and scandals in your local media over a period of at least two weeks. Share this with your management team and ask them the question: “How likely is this to happen to us?” What about ongoing training for managers about risk management, the management of reputation and crisis management competencies?

Pathway 2: Enhancing information flow: allowing information to flow effectively between decision-makers and those experiencing the risk first-hand, to provide early warning, inform the public and exchange best practice.

Action required: Having a proper internal and external stakeholder communication system in place is a start. Why wait for something to appear in the media? Why wait for a whistleblower? Keep your “ear” on the ground. What conversations are stakeholders having about your organisation?

• Refocusing incentives: creating the incentive frameworks that will allow decisions to be made to reduce risks previously considered exogenous.

Action required: Unless managers understand the value of intangibles and are held responsible for violating the organisation’s good name, you cannot expect increased vigilance. Make Reputation Management part of your Performance appraisal scheme.

• Improving investment: providing the investments necessary to mitigate risk.

Some ideas: Investments in Crisis Management preplanning, reputation training interventions and other systems is absolutely necessary and should be budgeted for.

• Implementing through institutions: improving (or creating) the framework needed to mitigate risks for which an institutional response is required.

Action required: The whole idea of an enterprise wide risk management system covers this. Creating a reputation risk management framework should be done. I have some ideas about the use of a RRC – Reputation Risk Committee. I know! More meetings! I can hear you say that. However meetings when conducted by a skilled facilitator and chairperson can become a useful tool to manage reputation. (I will deal with this in another post)

For those managers interested in reading more about risk management I can highly recommend the book called: ”Resilience to Risk – Business Success in Turbulent Times” by Sean Cleary and Thierry Malleret (Human & Rousseau 2006). Cleary says and I quote: “The critical factors for a competitive advantage are to brace ourselves for turbulence and to manage risk skilfully. To do this, we need to acquire relevant information, knowledge, understanding and skills. Next, we need to build our capacity to anticipate, absorb and manage rapid and discontinuous change. In short, we need to build organic, flexible and adaptive organisations that can cope with risk.

“We need to quantify risks, otherwise they will become a nagging concern. We need to develop short-term and long-term scenarios, and we need to look at the worst and best cases. This will give us the best shot at managing global risk.”

How ready are you to manage and mitigate risk to your organisation’s reputation? Have you identified the potential sources of reputation risk in your organisation? To be forewarned is to be forearmed.

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