Trea­sure it

Finweek English Edition - - BUSINESS TRENDS - SVET­LANA DONEVA svet­lanad@fin­week.co.za

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.

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