A GOOD REPUTATION is a thing to treasure. As far as corporate reputation goes, last year’s oil spill disaster in the Gulf of Mexico and the subsequent damage inflicted on the company responsible – British Petroleum – are evidence of the crippling effect bad management of a company’s public opinion status can have on its bottom line.
A recent report – Trust and South African Business, compiled by corporate affairs company Brunswick and global consultancy Spencer Stuart – found corporate risk management has rapidly escalated in importance globally following the economic crisis. Unsurprisingly, the catalyst that prompted the trend is the glut of media coverage of exorbitant executive remuneration, particularly in the financial sector, where trust, implicitly linked to reputation, is critical.
South African corporate – 20 being interviewed for the report – are on par with the trend. But what’s concerning is that reputational risk is still considered a “soft” issue and rarely factored into traditional risk management thinking. Reputational risk worries, which have the potential to wreak considerable damage on share price performance, include issues such as poor CEO succession planning, non-effective board members and thoughtless and ineffectual empowerment deals. Social media is another potential minefield where lack of reputation management on platforms such as Twitter and Youtube is on par with negative advertising.
There’s some indication that reputational management is slowly worming its way into risk considerations. One company in the survey – all were JSE-listed Top 40 companies – said: “Three years ago the audit department wouldn’t have responded positively to a request to look at reputational risk, but now reputation has moved from being a soft issue to a very real one, critical to the stability and fortunes of the business.”
Following the financial crisis a growing trend worldwide of appointing a chief reputational officer (CRO) has been noted, although SA has been slow on the uptake. The role of a CRO is to understand the external expectations of the company through communication with various stakeholders and to bridge the gap between those and the company’s own long-term strategic goals.