4 Min Read
Your business’ reputation is an intangible commodity, unable to be properly weighed or measured, and yet highly susceptible to the sway of public opinion. Regardless of what industry your company operates within, each interaction—whether it is a press release, an advert, a product, etc.—that you have with the public will help shape your reputation. Insuring and safeguarding your company’s reputation against risks can prove to be challenging, not only for the company but your insurer as well, since your insurer has to define what constitutes a reputational indemnity.
What is reputation risk?
Reputation risk is the threat of danger associated with the ethics and quality of your company, which has the potential to result in lost revenue and a damaged brand and public image, as well as fines and penalties. While your company is intrinsically tied to its reputation, you do not and cannot own it—its reputation is controlled by the public. The intangibility of your company’s reputation is the central challenge that you will need to overcome to effectively manage your company’s reputation risk.
Your company’s reputation is fragile—vulnerable to the fickle sway of public opinion and the risks associated with your various business channels. Each channel that is linked to your company offers its own unique risks. Yet, some are more damaging than others, such as managing a foreign supply chain.
Foreign supply chains offer your company a compromise: inexpensive cost for limited control of the operations. However, this trade-off could expose your company to unethical or unfavourable business decisions—if a supplier engages in either, your company’s reputation will surely be affected.
Therefore, it would behove your company to monitor and refine your diverse business channels to mitigate the risk of your reputation irrevocably eroding.
A crossroads for your reputation
At its core, reputation is a matter of trust that your company fosters between clients, shareholders and the public. Often, a crisis presents a company with a crossroads—depending on how the company manages the various aspects of that crisis will have great effect upon it going forward. If your company mishandles a crisis, you risk breaking or betraying the trust that you worked to establish. The consequences of improperly managing a crisis are diverse and varied. Here are just three consequences threatening your company’s reputation after a crisis:
However, the reverse is true as well—if your company is successful in managing a crisis, you have the potential to earn a great deal of reputational capital. Appropriate crisis management at your company may generate the following three benefits:
How your company handles a crisis is determined by the strength and depth of your reputation risk management plan.
Best practices for managing reputation risk
A diverse and detailed reputation risk management plan provides your company with strategies on how to best monitor your business channels and help shape public opinion in your favour. Follow this guidance to effectively manage your organisation’s reputation risk:
While this is not an exhaustive list of practices that could benefit your company’s risk management plan, it does provide a point of reference when you are shaping your own plan.
For more information about how to effectively manage your reputation risk and prepare your organisation for future success, contact Gateshead-based NC Insurance.