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Why reputational damage is as close as one tweet away

Posted on Jul 31, 2016

In 2013, damage to brand and reputation was nominated by the participants of Aon’s highly respected Annual Global Risk Management Survey as the eighth most important risk. By 2015 it had leapt to first place. There are a slew of factors which have driven this radical change, and with it the necessity to understand its importance to corporate reputation and risk today.

The demands on businesses to manage and mitigate critical risk issues that five years ago – or even one year ago – would have been considered marginal, is great and growing. As a result, no matter where they work, Corporate Affairs professionals are now at the epicenter of success or failure for their organisation.

In recent years – with the rapid development of technology, there has been a dramatic increase in the number of ways an organisation’s reputation can be damaged. These may include:

  • offensive images or messages in advertising
  • inappropriate remarks by senior executives
  • massive data breaches
  • large scale product recalls
  • compliance failures
  • culturally offensive behaviours by individuals or groups in the workplace.

Similar to cyber-risk, the unpredictable nature of reputational risk in the age of the 24 minute opinion cycle poses a formidable challenge. Organisations must operate under the assumption that an incident could potentially harm their reputation and brand and that threats may only be one tweet away.

Whether or not organisations have realised it, social media has become a key arena for reputation management. It is where an organisation’s stakeholders and the general public go to converse and research; it is where they engage with the business and brands around them.

Damage to reputation is not some abstract concept. It is a matter of accepting that with the vast opportunities social media provides comes a corresponding obligation to be vigilant about the risks to reputation that accompany that rise. We must constantly consider the implications of technological and societal change that is happening all around us. There is no simple answer or technology silver bullet – the key to staying on top of this fast evolving world of reputation risk is actionable intelligence.

Many companies haven’t fully grasped the impact of reputational risk on the bottom line or indeed the financial implication of not having a ‘social license to operate’. Despite the Aon study clearly identifying Damage to Reputation and Brand as the number one risk, the same study reported that only 19 percent of the participants would rate their organisation “A Grade” for their capability to protect against and respond to reputation risks. Worse, 39 percent rated the maturity of their reputation risk management as either average or below average.

But the damages to brand and reputation associated with social media can be managed and mitigated with the right risk architectures. The challenge, whether it be through the sophisticated analysis or the establishment of channels and frameworks to engage with your audiences, is to do more than manage and mitigate risk issues. The challenge is to predict and pre-empt them. In the future, it will be those organisations that get on the front foot to understand and harness the power of social media that truly succeed in the arena of corporate affairs.

Greg Daniel is in the Social Media Intelligence Group at KPMG