The New Features of Reputation







What do we know about Reputation in business?

Well, we know that it is important, that is an asset and a risk, and we also know that there are many definitions for the word. (Reputation is an asset according to international studies and has been rated for the past few years as the Number 1 Risk that organisations face. In fact one international study showed that Reputation makes up as much as 63% of a listed companies’ market value).

For instance, Kent Walker of the Asper School of Business at University of Manitoba in Canada,  wrote that there is a lack of a comprehensive and well-accepted definition for corporate reputation among scholars.

However, an analysis of the various existing definitions reveals that a company’s reputation can have different dimensions or drivers (Reputation Institute studies i.e. Emotional Appeal, Vision and Leadership, etc.) and is issue specific, and that different stakeholder groups may have different perceptions of corporate reputations.

Walker’s examination leads to a proposed definition for corporate reputation that includes five attributes: that reputation is perceptual, aggregate and issue specific, comparative, positive or negative, and temporal.

His definition offers guidance on how to approach reputation measurement – notably that it is important to define the issues that stakeholder perceptions are measured against, and that reputation measurement should ideally include both internal and external stakeholders.

I would like to add to these dimensions and state that Reputation has some unique characteristics, such as:

Meta- potential Impact:  Reputational Risk is now regarded globally as a “meta risk – a potential menace to fundamental business strategy, and possibly an even greater hazard to organizational survival than a financial restatement or problematical findings in a compliance report”. Reputation Risk is intrinsically more difficult to identify, assess, and manage because it centres around people and organizations and their interactions with a dynamic range of stakeholders. As executives know, reputation, quite simply, can make – or break – a company.

Volatility – Stakeholders can rapidly change position on an issue due to the speedy flow of information and new knowledge that comes to bear.

Dangerous – What would happen if a stakeholder Group turns against you or decide not to go ahead with a proposed project? Example- SANRAL.

Velocity – This is now a key characteristic of reputation risk i.e. . The speed with which messages now flow due to Social Media has changed the landscape of corporate communications and transparency, and ultimately the nature of reputation.

Point of Origin – Reputation Risk can emerge upstream and downstream, especially in supply chains.

Changing set of vulnerabilities – As the world become more and more networked, more and more companies are exposed to a changing set of vulnerabilities. The landscape of risk has changed. No longer can any country, city, business leader or organisation ignore Reputation Risk.

In this new world, incidents can damage a good reputation purely because an organisation or leader can take to long to act decisively with problems. For instance a reputation damaging incident can become international news in a matter of seconds and destroy relationships and brand value in other countries where the incident did not even take place. 

The bottom line – You should consider these features when you plan your reputation building, maintaining and protection reputation. Your Reputation Risk Framework should take these factors into account

One strategy that I recommend is that of Insulation. 

The word “insulation” means to protect. It is the act of insulating or the state of being insulated. It is the act of protecting something by surrounding it with material that reduces or prevents the transmission of sound or heat or electricity – a material or substance used in insulating: soundproof cork insulation; a layer of trapped air that serves as insulation.

What are you doing to insulate your business?

Working towards protecting your organisation is the act of insulating. By reducing or preventing the transmission of wrong messages, incorrect actions and “flow” we can protect against Reputation Risk. By creating goodwill through our positive actions we can insulate against future mishaps.

You can learn more about these features and the suggested mitigation approaches, at my next Reputation Risk Management workshop on the 15th – 16th April in Johannesburg.