Why reputation is a major factor in business continuity management Wide-ranging developments and trends are altering the crisis management and business continuity agenda: it’s no longer a question of “Should I bother to put some plans and resources in place?” - it’s now a question of “How far should I go?” And the latest dramas, recalls and disasters have injected even more urgency into this need to improve our corporate governance and include risk management and business continuity in this overhaul. At the heart of comprehensive risk management lies the increasingly important art and science of managing reputation. The Institute of Risk Management sets out a list of risk management duties for directors, requiring knowledge of risks, good risk management and management of communications with the financial community. This is backed up in the UK by the Turnbull recommendations that every company should account for and report on risk analysis every year. We can summarise the key points from these approaches as being: > Risk management is a reality, not a choice – it’s also an opportunity to review and improve. > Risk analysis should be carried out annually as part of an overall corporate and business planning cycle – not an add-on. > Directors should be aware of and carry out risk management duties as part of their core role. > Primary risk headings now include credit liquidity, business probity and reputation risk. > Reputation risk affects a company’s ethos and values and is no longer the role of just the communications department, as it involves the entire boardroom as well. In this context, risk management stretches into culture and values and how employees are rewarded and motivated – old-fashioned boundaries inside the organisation are breaking down or need to be surmounted. > Damage to reputation is often regarded as the most important risk. Crises strike at the core of a business’ intangible and most important asset – its reputation. From being almost an afterthought throughout the 1980s and 1990s, reputation has become more important as a barometer of company health in recent years, according to MORI’s annual Captains of Industry survey. In 2004, for the first time, MORI collated the 23-year-old poll’s findings, providing a clear picture of how company chiefs’ opinions have shifted. The essence of this was: in 2003, 48 percent of CEOs, chairmen and senior board members of the FTSE’s top 500 companies spontaneously mentioned image and reputation as the main criteria they use to judge a company – ahead of indicators such as financial performance and product/service quality. This marks a radical shift from 1983, when only eight percent of company leaders showed concern for reputation. Meanwhile, corporate governance has become a crucial element of a company’s working practices. This is particularly in the case of financial dealings. It deals with the economical health of the business, its relationship with its shareholders, and the fairness and transparency of its working practices. If a company sets itself clear and proper standards, it can improve its image, effectiveness and profitability. Comprehensive corporate governance is bound together by the need for professional and honest reputation management, from risk identification right through to disaster recovery. In the US , a recent survey showed that 70 percent of a company’s value comes from its organisational reputation and product brands. It also identified six clear areas in which people justified their feelings about a particular company: > Emotional appeal. How it is liked and respected. > Products and services. Their quality, innovation and value. > Financial performance. Its profitability and prospects. > Vision and leadership. A clear vision and leadership style. > Workplace environment. Staff morale, quality and management. > Social responsibility. How it deals with stakeholders, employees, communities and the environment. In conclusion let’s return to the starting point of this article. What should or shouldn’t be included under the auspices of business continuity management? As far as reputation risk goes, there really should be no argument. Reputation risk management needs to be one of the core considerations. It is not an optional extra and businesses ignore it at their peril. Author: Chris Woodcock is managing director of UK-based European risk management and communications consultancy, Razor. Razor specialises in risk, issues and crisis management. For more information, contact +44 1869 353800 or visit www.razor-pr.com Copyright © Razor Public Relations Ltd 2006
•Date: 26th April 2006 • Region: UK/World • Type: Article •Topic: Crisis management |
