Corporate reputation damage can hit at any time.
It negatively impacts share price, profitability, business operations and can destroy personal reputations and end people’s careers. The rapid rise over the past decade of the risk executive is testimony to how many companies are taking reputation and risk seriously…or is it?
Two recent research papers show an alarming disparity in what boards and executives say and what they do when it comes to preparing for a crisis. The Deloitte Crisis of Confidence report released earlier this year surveyed 300 board directors globally and found, among others, that only 49 per cent of these companies have playbooks for likely crisis scenarios and only 32 per cent engage in crisis simulations or training. Tellingly, only half of those surveyed said that board members and management have specific discussions about crisis prevention.
At more or less the same time, SenateSHJ released its own report, Reputation Reality: Trans-Tasman Perspectives on Reputation and Risk. It surveyed 150 business and corporate communication executives across Australia and New Zealand and there are some striking similarities to the Deloitte report. While 96 per cent surveyed said corporate reputation was a primary asset, only half had a budget line item for reputation management and only half were planning to invest in crisis simulation training.
Reputation and crisis management is all about leadership
From personal experience in dealing with more than my fair share of corporate crises I can vouch for the fact that leadership in a crisis ultimately comes from senior management and, in some instances, the board. And this only happens successfully in two ways:
- There are at least one to two executives and board members with crisis experience.
- The company has spent money on proper crisis simulation exercises and assessing, and reviewing its business continuity plans and crisis communication plans. As an aside, I’m still astounded at how many companies develop these plans in isolation. The beauty of a crisis simulation exercise is that it very quickly highlights the holes in plans and where they need to be better integrated.
Furthermore, only once a company has been through a crisis or crisis simulation does each department truly understand the often significant implications to their ability to operate and function properly. In my experience it is only at the time of a crisis that departments realise this is not the sole domain of corporate affairs or the executive team but rather that it requires an integrated response and approach during and after crisis.
At some point the board has to make a decision about how involved they become in the crisis. As the Deloitte report says: “The board must recognise that some crises may impair the integrity of senior management – and board members must be prepared to step in and run the company for a time if that happens.”
Ask yourself how many boards are not only set up to do this in terms of their board composition but plan for it? How many boards and management teams make the time for planning, simulations and other reputational risk issues?
The three priceless intangibles
For any business there are three priceless brand intangibles:
- Trust
- Reputation
- Morale
The SenateSHJ research found that not only are executives saying there has been an increase in the risks affecting reputation over the last three years and that reputation is more important to manage, but that it is also a lot harder to manage now than it was three years ago. It is hard enough recovering from potential financial losses following a crisis but it is even harder to measure things like long-term reputational damage, stakeholder trust levels and the trust and morale of your employees and whether they believe that your company is still an attractive place to work.
While business leaders told us that they really value their reputation, both research papers found that few are doing much about it.
Good risk and reputation management stems from developing the right attitude from the board down and then putting in place the necessary budgets, plans and training – long before the need arises.