A firm’s reputation is completely intangible and takes years to build but can be destroyed in almost no time at all.
A strong reputation helps sell everything from ice cream to used cars but in a sector like insurance, where the stakes are high and trust is essential, is nothing but vital.
David Van, Managing Director of reputation specialists De Wintern Group, says a reputation is a company’s most significant asset.
He says while most businesses say they proactively manage their reputational risks, they have no systems in place and are simply monitoring it.
“Keeping an eye on it just isn’t reputational management; that’s hoping and praying and assuming you are going to see everything when we know companies won’t,” he says.
Van says 70 to 80% of businesses reputational risks can be mitigated with advance planning.
Reputational risk management systems are built on the same principles used in normal risk management. Where the complexity lies is that reputational risks are difficult to understand and find.
“Reputational risk isn’t like any other risk,” Van says.
“Most other risks arise internally. Reputational risks can arise internally, externally, upstream or downstream. They come in a number of different guises.”
Ultimately, the only way to manage a crisis is to be prepared for almost any scenario.
“It needs to be a system where everyone has a job, they know what the job is and have rehearsed that job time and time again,” he says.
Into the fire
Last year, DUAL Australia was plunged into a crisis when news broke that a trusted employee had siphoned off more than $17 million in company funds.
Asia-Pacific CEO Damien Coates says the key lesson he learnt is to make sure you have mapped out all your stakeholders as part of an ongoing crisis management strategy.
As much as it hurts to peel yourself back and put all the cards on the table, it is critical to graining trust.
“The last situation you want to find yourself in is that once a crisis hits you’re left determining who in fact your stakeholders are,” he says.
Coates says a company’s reputation is paramount to its success; the way a company handles a crisis can either destroy, maintain or enhance that reputation.
When DUAL first learnt of the fraud, they immediately appointed external advisors to develop a crisis communications strategy.
Coates says: “The benefit of working with PR advisors is that they are able to help you map out how events may unfold as the crisis moves through different stages and scenarios.”
After enlisting the help of professional services firm, Ernst and Young, the next step for DUAL was to determine what the most relevant communication message was for each of their stakeholders.
This communication needed to be open, consistent and transparent, which Coates says could only be achieved by having a solo voice representing the company.
On the advice of Ernst and Young, Coates took on this role, handling all internal and external communications.
“The advice I would give to anyone facing a crisis is that there is nowhere to hide. As much as it hurts to peel yourself back and put all the cards on the table, it’s fundamental to gaining the trust and confidence of stakeholders during a crisis.”
Despite a traumatic few months, DUAL emerged relatively unscathed, with all its binders being renewed and its broking partners offering “phenomenal support”.
BrandMatters Managing Director Paul Nelson adds that the sign of a strong brand is one that has a large existing volume of trust, so that in the event of a crisis, the company has significant equity to stay out of the red.
As it has so many other fields, social media has brought great changes to reputation management.
Although the web is littered with tales of poor strategy or responses on Facebook or Twitter causing real-world brand damage, the CGU Corporate Affairs Team, David Grabau and Natalie Pennisi, say that while it is a misconception that social media is driving the increased risk of reputation loss, it has accentuated the speed at which companies now need to respond to a crisis.
“We have observed that social media acts as a breaking news source,” they say.
“As a result, the window of opportunity to respond to a threat is now even more critical.”
Coates and Van both agree that rather than being the risk itself, social media is just another channel through which risk is communicated.
“Whether something breaks on social media or the news doesn’t really matter from a reputational risk point of view,” Van says.
“In a crisis situation you are better off having an established presence on social media.
“You can learn a lot about your reputation through social media, rather than using it as an outbound communication tool.”
From Coates’ perspective, the speed at which social media operates reinforces the importance of having established systems and a controlled environment to deal with any crisis that may impact a business’ reputation.