But times have changed. Thanks to the global financial crisis, the banking royal commission and other high-profile corporate scandals, these days Boards are expected to be accountable for proactively measuring and managing organisational risk. In fact, their pay packets – and their jobs – are on the line if they don’t.

Typically, risks have been mostly related to financial and operational factors, human safety, omissions and lawsuits.

Thanks to the Hayne Royal Commission, this list now includes reputation risk.

Ok, so we’re adding a line item to the Board agenda. No biggie. It’s still the management team’s job to come up with the plan. But wait… how do I know they are measuring and managing reputation properly?

Below are 5 questions you should ask your CEO and management team to make sure they are effectively managing reputation risk.

First, a quick definition

What is reputation, anyway?

Reputation is how the market – your customers, employees, the media, regulators – perceives your company. This can be good, or bad.
Reputation is different to brand, which is what you say about yourself.

So, while brand trackers measure your stakeholders on how closely they identify to what your company says about itself, reputation trackers measure organic sentiment anchored to your public behaviour.

This is important, because if there is a disconnect between what you say or do and the public perception of what you say or do, this could cause reputation damage in the form of angry customer action, lost sales, or even a drop in share price.

Of course, if your reputation is good, meaning there is a positive public perception of you (generally based on your behaviour), this can be your greatest competitive advantage, leading to customer advocacy, higher sales, and share price growth.

The point is, you have no direct control over your reputation.

In fact, you may have multiple reputations with different groups of people. That’s why it’s important to keep tabs on it.

5 questions to ask your CEO about reputation risk

Ok, so how do we get an accurate reading of reputation?

1. What reputation issues are on our risk register?

The first step in measuring and managing reputation risk is to make sure every aspect is properly accounted for. How do you know the difference between an ‘issue’ and a ‘risk’? When does a ‘risk’ become a reputation risk? All these questions will become clearer if you track your reputation issues on your risk register.

Something like “disgruntled employee X threatens to go to media” may not have previously made the risk radar. But after the experiences of both the banking and aged care royal commissions, involving ‘prosecution by anecdote’, companies would do well to log each instance or ‘case study’ of perceived corporate wrongdoing or failure to meet consumer expectations.

2. Can we evaluate all risks through a reputation lens?

People’s perception of what constitutes a ‘reputation risk’ can sometimes be confined to media threats or social media comments. The reality is that any issue a company fails to manage properly can quickly escalate into a more damaging reputation risk.

Further, any non-financial risk has the potential to blow out into a financial one if not managed properly… The best companies are redefining their risk registers to not only include reputation dimensions, but also to apply a reputation lens to the entire register. If that sounds complicated – it’s not!

3. Do we have a crisis communications plan?

When was it last updated?

With our 24-hour media cycle, a slow response to any issue can quickly escalate to a reputational crisis. Most companies know what their key vulnerabilities are. Making sure these are documented, with corresponding scenarios articulated, doesn’t take long for your corporate communications team to put together. Have a plan, update it once a year, and make sure it is understood and accessible to relevant senior executives and spokespeople.

4. What are we proactively doing to measure and monitor reputation risk?

Having a crisis communications plan is a great reactive strategy for managing reputation risks. Similarly, while media monitoring and social listening can allow you to respond quickly if an issue turns into a crisis overnight, they are ‘lag’ indicators of your public reputation.

Combining these two strategies can help you manage your reputation – from the back foot. Getting on the front foot requires engagement with the public and your key stakeholder groups on a regular basis. The only way to measure and manage your reputation is to know what these groups think and say about you over time.

5. What reputation expertise do we have on hand?

What expertise do we have in-house? Are we adequately resourced? Are there external specialists who can provide the insight we need? Depending on what issues are on your risk register and what the impact assessment looks like, you may want to consider resourcing up in times of need. There’s nothing like having all the plans in place to then have a ‘failure to launch’ moment because the right people weren’t in the right place at the right time.

Making sure your people have the right level of access to adequately make assessments and decisions about your reputation plan going forward is essential.
personal reputation?

What if my CEO is the risk…?

While this isn’t one for the management to answer, Boards do need to consider what do you do if your CEO is a potential reputational risk to the organisation – perhaps through poor performance, or allegations of personal or other misconduct? Does your risk register or crisis communications plan cover this eventuality? At what point does the Board step in to preserve and prioritise organisational reputation over personal reputation?

Key take-outs

1. You have no direct control over your reputation. That’s why it’s important to keep tabs on it.
2. There is both upside and downside to reputation. Knowing which side of the ledger you’re on will help you take corrective action if you need it.
3. There are steps you can take to measure and manage your corporate reputation. Know which questions to ask your CEO and management team. And if you can’t ask them – or they don’t have the answers – call in the experts.

As a company director, you’re just like a referee. If the company you govern is successful and has no issues, you’re invisible. However, if things go badly, you’re first on the list of people to blame.

Find out more

Please contact Jasmine Hogg at Apollo Communications if you would like to discuss measuring and managing reputation risk