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Perspectives

Reputational resilience

Cultivating a strong reputation for crisis and beyond

Reputation. It takes a lifetime to build and only an instant to be torn apart. Reputational crises can destroy market value and recovery costs and influence stakeholders’ perceptions. But by cultivating reputational resilience, companies can prepare for crises while also creating lasting value.

Why does reputation matter?

How do you define an organization’s reputation? Reputation sits in the collective thoughts and feelings of a very broad set of stakeholders—employees, customers, regulators, suppliers, the list goes on. It’s the perception that results from the accumulated decisions, actions, and behaviors of the people within an organization.

Reputation management is about winning the hearts and minds of those stakeholders. In today’s volatile world, an organization’s positive reputation isn’t just a “nice to have.” It’s an essential part of doing business.

The drastic increase in crisis events, including cyberattacks, product recalls, and damaging social media posts have had significant impacts on reputation. In fact, the value of reputation has increased considerably. According to the 2016 US reputation dividend report, “Corporate reputations accounted for $3,977 billion of market capitalization across the S&P in March of 2016,” which was “20.7 percent of all shareholder value and 2.5 percentage points more than a year before.” 1

So it’s no surprise that reputation risk has jumped to the top of executives’ priority lists.

Executives across the globe ranked the damage to brand and reputation as their number one enterprise risk in 2017. 2

—“Aon global risk management survey,” Aon plc, 2017

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What is reputational resilience?

Never has reputation risk been so prominent. Yet managing reputation risk remains problematic and challenging for many organizations. In a recent Deloitte survey, “Crisis of confidence,” 73 percent of board members identified reputational risk as the area where they felt the most vulnerable. Yet only 39 percent had a plan to address a reputational crisis.3

The good news: There are many ways organizations can manage brand and reputation to protect, preserve, and enhance enterprise value. We refer to this as “building your reputational resilience.” It’s not only about preparing for a crisis, but it’s also about creating value through managing reputation risk.

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How can an organization build reputational resilience?

By implementing a proactive approach to reputation management, an organization can sense threats, seize opportunities, and shape beliefs and behaviors to achieve desired outcomes. Here are some key steps to help you start thinking about and building your organization’s reputational resilience.

Strategy
A successful reputation strategy includes the development of a well-defined master narrative that’s consistently used to help an organization amplify its brand, differentiate itself in the marketplace, and achieve its business strategies.

Advocacy
Advocacy is about empowering stakeholders, both internal and external, to actively champion your brand and protect your reputation, especially during times of crisis or brand shocks. Employees and leadership should be armed with:

  • A compelling brand narrative
  • Tools and processes to identify, report, and respond to brand risks
  • Resources and training to build resiliency and act as brand ambassadors

Organizations should also focus on strengthening relationships via targeted campaigns and strategies to transform external stakeholders into brand advocates. Engaging stakeholders in a purposeful way can help ensure that both parties are getting what they need and expect out of the relationship.

Resilience
Resilience is about sensing, assessing, and managing risk and proactively taking steps to protect your organization’s reputation from a crisis. This includes developing capabilities to sense threats early, evaluating and assessing risk impact, and preparing for and responding to threats. Examples of building resilience can include 24/7 monitoring of traditional and social media outlets and embedding a risk sensing team into the risk governance structure to help inform decision making. These practices can be used to spot potential risks while also creating strategic value for an organization such as monitoring and acting on industry trends.

Another important factor for resilience is implementing a formal crisis response program that’s continually adapting. Having a formal program in place that accommodates such measures as developing a crisis playbook, implementing scenario planning, introducing training for response leaders, and establishing mitigation strategies can help your organization prepare to respond to a reputational crisis.

Governance
None of these steps can truly work without a strong governance program that establishes a cohesive platform and approach for managing reputation. A successful governance model needs to include measurement, monitoring, and aspects of continuous improvement. A governance model doesn’t necessarily have to be about creating a new function or new jobs. But it can be about connecting what an organization already does to a consistent and unified model that helps protect, preserve, and enhance your brand and reputation.

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Next steps: What questions should leaders ask to get started?

Threats to reputation are pervasive and can feel all-encompassing, unmeasurable, and unmanageable. These simple questions can help leaders begin to understand their reputational risks, as well as opportunities for value enhancement:

  • Does my board and CEO worry about brand and reputation?
  • Which brand strategy will drive the greatest value for us?
  • Are we doing enough to engage our key stakeholders?
  • Do leaders and employees understand brand and reputation risk?
  • Have we prepared well enough to handle a reputational crisis?
  • Do employees understand their role in building and protecting brand and reputation?
  • What should we be doing to better protect, preserve, and enhance our brand and reputation?

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Final thoughts: What’s the benefit in building reputational resilience?

Reputation is what your company is built on. It’s what your customers base their loyalty on. It’s the culmination of everything your company does—from product quality to employee behavior and everything in between. To effectively promote, protect, and preserve your brand, reputation must be prioritized as a key strategy and managed programmatically, with ownership and accountability residing in the C-suite.

Successful companies take a forward-thinking approach to managing reputation, using it not only as a defense against crisis but also as an asset to fuel their business. A strong and well-thought-out reputation framework helps an organization sense threats, seize opportunities, and shape perceptions to achieve greater brand resilience, market differentiation, and strategic positioning.

Don’t simply wait for a crisis to occur. Prioritize reputational resilience to proactively prepare for the worst, while also laying the groundwork for the best: Creating long-term value in brand equity, intellectual capital, market differentiation, strategic positioning, sustained earnings, and future growth.

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If you’re interested in learning more, please contact us. We’d be happy to schedule a meeting with you and your team.

Keri Calagna
Principal | Deloitte Risk and Financial Advisory
Deloitte LLP
+1 212 492 4461
Learn more about Keri

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1 “The 2016 US Reputation Dividend Report,” Reputation Dividend, 2016, http://www.reputationdividend.com/files/9114/7634/1581/US-2016_Rep_Div_Report.pdf.

2 “Aon Global Risk Global Risk Management Survey,” Aon plc, 2017,
www.aon.com/2017-global-risk-management-survey/.

“A crisis of confidence,” Deloitte Touche Tohmatsu Limited, 2016, https://www2.deloitte.com/global/en/pages/risk/articles/a-crisis-of-confidence.html.

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