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Risk Doctor Briefing: Managing Reputation Risk

SERIES ARTICLE

Garry Honey

The Risk Doctor Partnership

UK
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How can reputation be integrated within an enterprise risk management (ERM) framework? This is not possible, because reputation is both a behavioural and consequential risk, so you never know what might cause it until it is too late. Reputation is not easy to value or protect, and many insurers will not underwrite reputation risk.

It is however possible to reduce reputation risk at least partially. But first we need to recognise seven facets of reputation:

  1. Reputation cannot be controlled: it exists in the minds of others so it can only be influenced, not managed proactively.
  1. Reputation is earned: trust is based on consistent corporate behaviour and performance.
  1. Reputation is not a single entity:  it depends on the stakeholder’s view. One organisation can have many different reputations, varying with each stakeholder.
  1. Reputation quality will vary: each stakeholder brings a different expectation of behaviour or performance and so will have a distinct perception of reputation.
  1. Reputation is relational: you have a reputation with someone for something. The key question is therefore: ‘with whom, for what?’
  1. Reputation is comparative: it is valued in comparison to what a particular stakeholder experiences or believes in relation to peers, performance and prejudice.
  1. Reputation is fragile: it can take a lifetime to build and seconds to lose. The true value of reputation can only be appreciated once it is lost or damaged.

So how can reputation risk be managed?

The first step is to understand the scope of possible damage, as well as potential sources and the degree of possible disruption:

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About the Author

pmwj24-jul2014-Honey-AUTHOR IMAGEGarry Honey flag-uk

Plymouth, UK 

Garry Honey is a Visiting Professor at Plymouth University, specialising in strategic risk. He founded UK-based risk consultancy CHIRON which specialises in intangible or ‘soft’ risks such as reputation. He has clients in all sectors, but is particularly interested in public service brands (schools and hospitals) with complex stakeholder networks where public trust and reputation risk go together. Garry has enjoyed a variety of senior management roles. His early career was spent in Europe marketing consumer goods before moving into consultancy with KPMG. His expertise covers strategy, communication and risk particularly in the Governance, Risk & Compliance (GRC) arena.  He can be contacted at [email protected] or via website: www.risk-doctor.com