Wednesday, 22 May 2013

Managing reputational risk

 



All prudent businesses manage risk. It's part of the daily role of management. The risk that sales forecasts won't be met; the risk that suppliers will increase prices; the risk that customers will default, the risk that key staff will leave...

But what about the risk to their reputations? A business's reputation can be harmed in a multitude of ways, and it's every business's core asset: if your reputation is put at risk, all other forms of risk become relatively insignificant. But how many businesses have a strategy to manage this 'reputational risk'?

Here we examine that key question. And the answers are many and various, but they basically break down into internal or external...

Internal

Covers such aspects as:
  • Training - initial and ongoing
  • Compliance - with the businesses' own rules and the laws/regulations imposed on it
  • Management reporting

External

Just one thing matters here:
  •  Customer satisfaction 
In the past, if 80% of your customers were happy, that was considered a good result. In all but the most exceptional circumstances the 20% 'dissatisfieds' would be drowned out by the majority of 'satisfieds'...

But not any more, not since the web came into being. If your business has just 100 customers, the 20 'dissatisfieds' can make enough noise to bring down your reputation, causing permanent damage to your business.

This bears closer examination:

Any one of those twenty can post anywhere on the web, not just once, but as many times as they feel inclined to. Google will pick up their views and they will be displayed in Google searches. You have 1000 customers? The odds increase exponentially: the chances of one of the two hundred 'dissatisfieds' being the kind of person who will have the energy to post multiple times increases, and research shows that the more negatives are published, the more other 'dissatisfieds' are likely to join in...

And we haven't even mentioned disgruntled ex-staff or unscrupulous competitors yet.

Your strategy
  • Ensure your management and staff - all your staff (remember Miss Irhlweg at United Airlines?) - understand the implications of reputational risk.
  • Ensure you have a credible mechanism for harvesting positive comments from your satisfied customers so you have them to weigh in the balance when something does go awry (and it surely will, even in the best run business). It will be too late when the negative noise starts.



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