A recent global risk management survey shows 40% of businesses are unprepared to deal with a major reputational crisis.

Nothing feeds the news cycle like a company scandal, and with social media and citizen reporting on the rise, serious blows to a company’s reputation and market value can spread in nano-seconds.

The likes of BP, Goldman Sachs, Toyota, Nestle, Domino’s Pizza, and locally and more recently Eskom, Capitec, KFC, the Estate Agency Affairs Board and Lonmin are among a host of brands that have taken a reputational hammering in the court of public opinion.

While the precise impact of these reputational crises in terms of lost profit and revenue are difficult to quantify, there is no denying that these brands have all suffered varying degrees of quantifiable financial loss, and face the onerous task of rebuilding the reputations that in many instances have taken decades to establish.

In view of such headline-grabbing incidents, it is not surprising that damage to reputation /brand has emerged as the number one risk facing companies worldwide according to Aon Risk Solutions, the global risk management business.

Reputation becoming increasingly pricey

Aon unveiled the top risks as identified by CEOs, CFOs and Risk Managers in its 2015 Global Risk Management Survey, providing comparative insight into different perceptions of risk.

“Reputation is the sum of many intangible parts, among them a good public image, a reputation for honesty, quality products and services, good management, and social responsibility.

“In recent years, with the rapid development of media technology and heightened awareness of multiculturalism, there has been a dramatic increase in the number of ways a company’s reputation can be damaged,” explains Terence Williams, CEO of Aon South Africa, risk advisors and insurance brokerage.

“However, the tools and levels of effort business leaders use to manage their reputations are lagging, heightening such risk,” he continues.

Reputation, which is often categorised as an intangible asset, is becoming increasingly pricey, exerting a direct impact on the company’s bottom line.

 Who is at risk?

In some instances, the damage may be temporary and although profits may take a hit, they eventually return to profitably with some incredibly hard and costly lessons learned.

For others, the damage may be so severe that attempts at a comeback are extremely difficult or even out of reach. Naturally, the risk to reputation and brand poses a major concern for organisations that attract greater media and public scrutiny due to their size and wider name recognition.

“A comprehensive reputation risk-control strategy is critical to an organisation’s bottom line and its ability to rebound from a hit to its reputation, but few are implementing measures to avert such a crisis. Meticulous planning for crises, a thorough understanding of individual roles and responsibilities, and development of a road map are the keys to protecting a brand,” says Terence.

Managing reputational expectations is all about good governance, operations and risk management that is supported by operational realities.

Companies need to treat damage to their reputations as understandable and even predictable challenges that one should expect in today’s business environment.

“The reality is that while insurance can cover the immediate costs of resourcing the response and crisis management campaign, some even subsequent legal defence costs, can you really quantify the value, current and in the future, of lost clientele, patronage and respect from public, shareholders and the media?” asks Terence.