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BarnOwl

Reputational risk – make or break!

20 February 2017

I wonder if management and employees of an organisation really appreciate what goes into building a great brand and reputation. People buy from people and organisations they like and trust. Trust is built up over time through exemplary conduct, great products and services combined with a lot of passion and an obsession with client satisfaction. We take big brand names for granted every day; they have all put in huge effort and time (especially in the early years) getting people to: know about them, like them, try them, trust them, buy them, re-buy them and refer them.

How long does it take to destroy your reputation and break the trust? Take the recent Ford Kuga saga. I think potential buyers of a Ford may think twice right now and perhaps look at another brand of car not to mention those aggrieved parties who will never buy a Ford again and tell everyone (via social media) how badly they have been treated and advise others never to buy Ford.

According to Marietjie Theron-Wepener who reports for IOL says ‘Ford South Africa has suffered huge damage to its reputation thanks to its poor handling of a crisis involving some of its Kuga cars. Reputations are built on trust. Customers are increasingly interested in the way large companies behave and have become more vocal in calling for transparency, accountability and social and environmental responsiveness. Clients are applying a whole new set of criteria before buying products and services. These include ethics, values and stakeholder democracy’

So why would an organisation not put in necessary effort and controls to safeguard what is arguably their most important asset (i.e. their reputation). Is it complacency; corporate arrogance, it won’t happen to me attitude, too much effort, too focussed on making money, cutting corners, ignoring the finer details of what made the business great in the first place, not keeping up with the times, underestimating the power of the people and social media and the growing social and environmental consciousness of younger generations.

This is why good corporate governance which encompasses effective risk management is critical to the sustainability of any organisation and must not be fobbed off! Risk management needs to be embedded across the entire organisation from top to bottom especially at the coal face where consumers interact with your business. Many exco and board members think that managing the top 10 strategic and operational risks is enough. This is the tip of the ice berg. The real risk is far below at the coal face especially where employees have little or no understanding of the impact of their actions on the reputation of the organisation and its fragility. The same applies to stock markets, the macro economy and countries (e.g. South Africa’s credit rating slip based on reputational damage)

As a risk officer (and / or board, risk and audit committee) what are you doing to convince and ensure management take risk management seriously and see it as a strategic imperative driving value creation and protection?

  • Does management buy-in and drive a culture of good corporate governance embracing ethics, transparency, social and environmental care?
  • Is a culture of risk management embedded at all levels of the organisation to ensure that risks are identified and managed?
  • Are management and staff aware of just how fragile their reputation is and the consequences of poor risk management?
  • Are there robust risk management plans in place to ensure that the impact and likelihood of risks including reputational damage is minimised?

Written by Jonathan Crisp

Director BarnOwl GRC and Audit Software

www.barnowl.co.za

For a more comprehensive report on the Ford Kuga saga see: http://www.iol.co.za/motoring/industry-news/kuga-fire-issues-have-damaged-ford-badly-7557130

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