A Memo to CEOs About Reputational Risk

Reputational Risk

Dear CEO,

Your Corporate Communications Officers (CCOs) are concerned about how to build trust and credibility for your company. 

Over the years, Reputation Institute has surveyed CCOs around the world to better understand their needs and perspectives on reputation. What we have found is that most corporate communications leaders increasingly consider reputation as more important than ever before. 

But the irony is that most CCOs are not fully prepared to meet the demands of their company when it comes to the measurement needs of reputation – and are left wanting when asked to connect the dots: how does reputation data fit with other corporate KPIs?

Indeed, what we have found is that reputation is critical to enhancing business success, but the problem is that most companies are not reputation ready. Sourced from our own Reputation Leaders Study of CCOs around the world, the data indicates:

  • 67% of executives believe that reputation is a high priority for their company
  • 75% of executives state that reputation has grown in importance over the last few years
  • 36% of executives are ready to proactively manage reputation
     

Furthermore, when it comes to assessing where they are on their reputation journey of understanding, CCOs generally believe their company is not aligned between measuring reputation, and how reputation data is integrated into long-term decision-making. In fact, based on our Reputation Leaders Study data only 3% of CCO’s feel confident that reputation data and other KPIs are fully-integrated with corporate strategy.

Figure 1: CCO View of Their Own Company's Reputation Journey

Brand Reputation
Source: Ri Reputation Leaders Study, 2015


Implicitly, what this tends to suggest is that corporate communications and reputation leaders are feeling the increased pressure to manage their company’s reputation, but they don’t always have the tools, the clout, the seat at the table, or even measurement systems place to satisfy the growing and evolving corporate need.

And perhaps because of this, many CCOs are running blind, feeling overwhelmed by big data, paralyzed by not knowing where to start, or at best making do with a less than ideal proxy for how they are currently measuring reputation.
Or in other words, they are not feeling 100% reputation ready.

Why is that so?

As the impact of the reputation economy is gathering pace, CCOs are under increasing pressure from CEOs and Board Members to get a better grasp on their own company’s reputation.

How does all this make CEOs feel? Anxious

CEOs are becoming even more worried about reputation.

According to new research by PwC that surveyed CEOs around the world, it’s because the most senior leadership at the helm of the company is not fully satisfied with what they have available in terms of the required data to help them understand corporate reputation.

Seemingly, there’s a huge gap between the CEO’s view of the data their company has on measuring, relative to how critically important it is to better understand it.

Reputational Risk
Source: PwC, 2019


The study divides the data that a CEO uses to make long-term business decisions into categories and shows how "critical" and "important" it is as compared to how "comprehensively" their current measurement needs are being met.

The study data was most recent captured in 2019, and it shows the gap on the merits critical/important vs. comprehensive of brand and reputation data at 66%. On the same basis, the data gap on the risks the business is exposed to is at 65%.

All this points to a high level of dissatisfaction among CEOs about the status quo of how reputation and risk is being assessed. It also strongly points to the fact that the pressure to learn more is being pushed downward throughout the organization, suggesting the only way to close the gap is to improve the adequacy of their current reputation data.

So, how can a company manage reputation risk?

  1. To give CEOs what they are asking for — and to take the pressure off the CCO, there’s a need for a normative reputation measurement system that benchmarks the company’s reputation vs. the competition among the stakeholders that matter, and an opportunity to more closely knit reputation data with other corporate KPIs.
     
  2. To fully satisfy the CEO, there’s also a need to both identify and assess the potential reputation risks to the company — requiring a process by which the firm can effectively measure the what-if risk scenarios through predictive analytics that can value the potential downside.

Taking these measures will not only make the CEO happier — and allow the CCO to hopefully enjoy more stress-free days and fewer sleepless night. It will also provide the company with a measurement system (RepTrak) to calibrate the upside of reputation as an economic multiplier —  and to continuously assess reputation as the insurance policy against the downside risk of a crisis.

 

Sincerely,

SHG

  Stephen Hahn-Griffiths
  Executive Partner, Chief Reputation Officer
  Reputation Institute
  @shahngriff

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