Everyone hopes their company has a good reputation, but far too few take measures to protect this valuable asset. It may be a perennial ‘to-do’ list topic, but often fails to rise to the top until the company dominates the headlines for the wrong reasons and is forced to deal with a full-blown reputational crisis.
Allianz’s Global Risks Barometer found that loss of reputation or brand value is one of the top 10 business risks globally. UK businesses ranked it the fourth-greatest risk. As for any other, a risk assessment should be conducted to understand where the vulnerabilities lie, which reputational risks can be controlled, and what steps can be taken to mitigate the threats. Once completed, senior management and external advisers should conduct regular crisis simulations to test response mechanisms and identify areas for improvement.
I have previously written about the damage to Telsa arising from Elon Musk’s social media behaviour but reputational risks can materialise from every angle. Homebase became the subject of a story on the BBC about the best and worst online retailers with the first sentence stating: ‘Homebase runs Britain’s worst online shop, according to a survey by consumer group Which?’. Management risks should also not be underestimated, as the homebuilder Pesimmon has learned the hard way. When CEO Jeff Fairburn stepped down last week in the wake of negative press about his £75m bonus, Euan Stirling, head of stewardship at shareholder Standard Life Aberdeen, was quoted in the Guardian saying: “Persimmon’s reputation has been tarnished by issues around Jeff Fairburn’s pay.”
Reputational damage can often be prevented but not always. When it threatens, the corporate response is critical. Get it right and brands will not just survive, but may thrive. Jenny Packwood, Head of Brand Engagement at KFC UK & Ireland, spoke at CommsCon about the company’s response to an unprecedented operational and communications crisis earlier this year: unthinkably, KFC ran out of chicken. Its response can be held up as an example of best practice: the fast-food chain tackled the problem head-on, assumed responsibility, and took control of the public narrative.
Sometimes reputational damage can be predicted, and the message controlled proactively. Consider, for example, Lloyd’s now-completed review of Syndicate Business Forecasts. Many headlines emerged, with variable reputational impact. The same outcome may be reported under the headlines ‘Smith Syndicate Business Plan approved; capital redeployed to most profitable classes’, or ‘Smith Syndicate withdraws from lossmaking lines’. Shareholders and capital providers will have very different reactions to these vastly different proclamations about the same event.
Companies cannot expect to prepare for every possible crisis. However, putting the executive team through simulated pressure helps to ensure their confidence when a real crisis occurs. Too often, leadership teams retreat from the overwhelming pressure, leaving a vacuum typically filled by someone else telling the story, to the detriment of your reputation and brand value. Practical steps can help to ensure that the story heard by customers, shareholders, regulators, and others is the story the board wants recounted.
- Preparation is critical. Senior management and the communications team must work together to devise a crisis communications plan, outlining who needs to be told and how, the chain of decision-making command, and even ensuring everyone’s contact details are on hand.
- Your executive team and the crisis plan itself need to be stress-tested through simulations. Get all the relevant people together to manage a fictional feasible crisis, and learn where the challenges lie.
- Get lawyers in place and briefed.
- Have a PR agency on standby. External advisers should be appointed in advance and involved in stress-testing exercises to ensure a cohesive response.
If you would like to arrange a crisis simulation for your firm, please get in touch.