Posted: 09 Nov. 2020 4 min. read

Operational Risk Management: Your Brand Differentiator

In today’s uncertain and disruptive business landscape, universal principles, assumptions and business strategies are constantly being challenged. There is a massive shift taking place toward technology-enabled business models, resulting in the displacement of current operating models. However, before adopting new models – or even purchasing a new product or service - an important deciding factor comes into play: what will be the impact on the organization’s brand?

A brand exists in the minds of consumers. That’s it. And no matter how clever brand messaging is, it has to map to the customer experience, or it will be dismissed as empty promises. Therefore, it is crucial for organizations to understand the factors that can affect and influence market perception of the brand, while understanding that there is no single ‘magic answer’.

Brand vs. Risk: A Balancing Act

For a brand to develop an identity synonymous with its company values, and the quality of its products and services, it is important to factor in elements such as foresight, monetization of marketing and advertising activities, frictionless products and services, and resiliency. Add to this a reliable workforce with a broad range of skills, and the ingredients are in place to have the brand deliver long-term benefits.

While the elements above are important, they do not include a less obvious, but extremely imperative factor that can impact customer brand perception: how well the organization manages resilient and stable operations, and the risks associated with those operations.

Managing Operational Risks

Operational risk is defined as the risk of change in value (of an organization or business) due to losses from internal events such as failed internal processes, people, systems, or external events such as natural disasters and catastrophes. A failure to address operational risks appropriately can spell doom for any brand. However, these risks - across product creation, delivery and after-sales support - can be transformed into opportunities to strengthen brand loyalty among customers, by engaging in sound operational risk management.

How do brands effectively manage operational risks? What steps can be taken to help the brand build value, so a strong reputation can be leveraged to successfully introduce new products and services, and enter new markets?

Let’s touch upon a few key points that can fortify a brand’s ability to retain its position in the market and keep its promise to consumers:

1.      Positive Press Only – Taking care to avoid being in the news for the wrong reasons can ensure that a brand’s value stays intact. Nothing can impact a brand like bad press, which can spread globally in minutes in this age of social media. A robust operational risk management process can dramatically reduce the opportunity for negative, newsworthy events to occur. This protects the brand from negative publicity, so it can continue delivering on its promise.

2.      Quick Reaction Time –  Responding in a timely and appropriate manner during times of crises helps operational resiliency and protects the brand. This can go a long way toward cementing a brand’s value in the eyes of consumers and, once again, is only possible if the brand is supported by strong operational processes at the back end.

3.      Smooth Operations – Ensuring that all business operations are running smoothly is the final step that a brand must take to build its competitive advantage and reinforce its value. This means focusing on optimizing all of the key functions, from procurement, to talent management, to packaging and delivery.

A recent Deloitte Debriefs webcast titled “Operational risk management: Implementation, data, and analytics,” saw 79% of C-suite and other executives mention that significant operational risk events have an impact on shareholder value over the long term.[1]

Operational Processes: The Differentiator

Let’s now take a look at a few examples of how a brand can set itself apart from its peers through operational processes.

One of the most important brand differentiators is customer experience. This is the emotion felt by customers while interacting with the brand at every step of the solicitation, buying and servicing processes. If a particular brand has promised a certain deliverable to a customer, it needs to adhere to that brand promise even in the face of adversity. Customer experience is just as important as the quality of the product or service itself, and can create brand loyalty and trust in an ever-changing consumer base. For example, India’s oldest hospitality chain has maintained its brand value by building operational excellence around how it provides customers premium service. It has institutionalized how it retains its culture with strong people and operational processes, functioning in unison like a well-oiled machine.

The customer experience can only be positive if a robust supply chain exists. This is the sequence of processes involved in the production and distribution of a commodity. Organizations today face multiple risks as they diversify supply chains and globally outsource production to third parties. An example of this can be seen in one of India’s most successful food and grocery retailers, whose brand promise centers around the premise of Every Day Low Prices. To accomplish this brand promise, they have an extremely efficient procurement function that has figured out how to manage the operational risks involved.

When thinking about a brand generating abundant revenue, and doing extremely well in its particular industry or market niche, do not forget the strong operational processes that drive the delivery of its promise to consumers. It may sound like common sense, but it is always better to build an operational risk management capability before it is needed. This protects against unforeseen brand-damaging events in the future – and increases the likelihood that the brand will continue to be a business asset for years to come.

 

[1] On March 28, 2019, a Deloitte Dbriefs webcast, titled “Operational risk management: Implementation, data, and analytics,” polled more than 955 C-suite and other executives online about operational risk management. Answer rates differed by question and respondents differed by webcast poll.

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Key Contact

Burzin Dubash

Burzin Dubash

Deloitte Touche Tohmatsu India LLP

Burzin Dubash currently serves as Partner in the Risk Advisory Practice at Deloitte India. A risk management expert with over two decades of experience, his core expertise lies in in delivering high impact internal audits, assisting companies with business process & controls transformation, risk analytics and enterprise risk management. His experience spans managing global engagements across sectors including tech, telecom, consumer, hospitality and donor organisations. He is currently involved in transforming the way in which operational risk services are delivered by Deloitte India. Apart from the above, his current focus areas include: • Building the IA 3.0 offering for the India geography • Developing the OR&T practice • Risk Analytics to solve business challenges for CFO, controllership and internal audit teams Prior to joining Deloitte, he served as Executive Director and Senior Partner in a boutique risk consulting firm, where he was part of their leadership team. Burzin is a qualified Chartered Accountant. He is also a Fulbright Fellow, having completed the Fulbright-Nehru-CII Fellowship Program at the Tepper School of Business, Carnegie Mellon University. Burzin is frequent speaker in national forums on the topics of internal audit, risk, governance & compliance. He was the Past President of the Board of Governors of the Institute of Internal Auditors (IIA), Bombay Chapter and is currently on the Central Council of the IIA India. An avid weekend cricketer, Burzin turns out for the Bombay Gym seniors cricket team, having won the Mumbai inter-club 40+ tournament twice in a row!