Reputational Risk: The Emerging Battle

Join BearingPoint senior manager Larry Taylor as he explores the importance of managing reputational risk. Reputational risk measures the change in perception of a company. A prime example is the recent credit crisis. Even companies that were not directly affected by it, but had “credit” in their business description, were quickly identified as a threat. Many vendors stopped their association with them and clients ran to competitors for guidance. Now more than ever, it’s extremely important to safeguard a company’s reputation. The reputation is currently serving as the sole source of economic value of a firm.

In a situation where the reputation being portrayed is incorrect, a company must have the ability to quickly respond to such criticism, prior to any real damage being done. The key to preventing such a travesty is to understand the sources of your risk and determine what the potential impacts would be. There are also many ways to determine how a company is currently perceived, such as its stock price, customer acquisition and customer patterns. These are clear indications of your favorability and a clear indicator if changes need to be made.

Key executives need to know how their company is being displayed in the marketplace and how they are being evaluated through a stakeholder prism. Many times, a company is not aware of its perception in the marketplace until it’s too late. With all the new technology available, it’s easier than ever to monitor your company’s reputation. It’s the responsibility of the executives to have a clear message relayed to their employees so that everyone assembles under one culture. It is only then that people will band together to ensure the company’s perception remains positive and “outs” anyone who strays from what has been clearly outlined as the company’s standards.
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