Concept of Reputation Risk Management || Trainer Anil Maurya

Objective

To learn about the reputation risk   

Key Learnings from the Video

1. Concept of Reputation Risk

The loss of a business/brand’s reputation is known as reputation/reputational risk. The following are the consequences when the brand name of a business gets spoiled:

Decreased sales

Declined market share

Reduction in the social capital (Value of brand on social media platforms)

Reputation risk causes loss to business from all aspects. Businesses have to struggle for a long time to gain the lost reputation.

For example, a few years back Maggi lost its reputation and was even banned and was away from the market for a long time. The reputation loss also caused loss to its parent company Nestle and also created a challenge for its future in the country, and this resulted into changes in the top management of Maggi.

2. Reasons of Reputation Risk

a. Product Failure

It means the product is not up to the mark as per customers’ expectations or the commitments which you made while launching it.

For example, the news of the blast of Samsung Galaxy Note 7 has put a question on the reputation of Samsung phones. It even started the replacement campaigns for defective Samsung Galaxy Note 7 phones. .

Even a ban was imposed on carrying this phone on flights. Such incidents ended the market for Samsung Galaxy Note 7 and the company also faced the charges of manufacturing poor quality phones.

Samsung took relevant steps to handle the crisis and it also pre-launched the Samsung Galaxy Note 8.

b. Bad customer service

If a company is not able to provide good customer service, then it directly impacts the reputation of the company/business.

For example, taxi service provider Ola through customers’ feedbacks found that the behaviour of Ola drivers was not good and this caused loss of reputation.

Ola mitigated the risk by taking actions such as including driver’s ratings in the Ola App, the number for an emergency call in the Ola App, and providing training to its drivers. 

c. Negative publicity

The reputation of a business is at risk when negative news related to business or product floats in the market. 

For example, a few years back news of finding of a surgical syringe in the can of diet Pepsi came. Initially, the company did not pay much attention to such news but such news came from other countries too. PepsiCo timely handled the situation and convinced people by releasing the video of the packaging process of its plant.

d. Misinterpreted communication

The message you want to convey to your customers is misinterpreted by them is also a reason for reputation risk.

For example, the video advertisement of Tanishq in which it tried to bring together two communities was misinterpreted by the audience and the company has to face the consequences for it.

Sometimes audience also misinterprets the statements of celebrities and considers them as anti-nationals.

e. Unhappy customer reviews or actions

The negatives remarks by unhappy customers on social media platforms can also cause huge business loss and reputation damage too.

f. Image of brand ambassadors

A brand ambassador of a company becomes its face if it is associated for a long time. The company also has to face the loss if the reputation of the brand ambassador damages.

For example, Tiger Woods endorsed brand Nike also faced damage when he got into controversies. 

g. Lack of swift and appropriate action

Reputation risk can be caused due to small action such as a Tweet. The damage of it can be large if quick and appropriate action is not taken timely.

3. Impact of Reputation Risk

a. Direct impact of reputation risk

This may be caused due to any action take or not taken by a company like:

i. Bad product

ii. Bad service

iii. Wrong marketing campaign

b. The indirect impact of reputation risk on business

This may be caused due to any of the following:

i. Employee (Like a controversial Tweet done by an employee)

ii. Customer (Like customer posted a negative review)

c. Tendentiously impact of reputation risk on business

This may be caused due to any of the following:

i. Joint venture

ii. Brand ambassador

iii. Lawsuit

iv. Other reasons like Product failure report or a legal case challenging your promotional claims

4. Mitigation of Reputation Risk

Reputational risks are the outcome of unexpected situations. The best practices to reduce the possibilities of reputational risk are:

a. Consider risk factors in business planning and strategy building

i. Consider all aspects while doing short term, mid-term, or long term planning.

ii. Make a list of possible risks related to all aspects.

iii. Assess and prepare to deal with reputation risk.

b. Effective communication and brand building

Effective and regular communication with customer will help you to build a strong bond with them. Due to this bond, your reputation risk decreases.

c. Transparency on public reporting

i. Never do any ambiguity for financial reporting or in the quality of the test reports

ii. Always have an accurate and transparent report

d. Company culture around ethics and compliance

The culture of a company moves from top to bottom. Ensure that employees of all level should have be ethically sound in terms of how they do business, actions and compliance.

e. Strong and active top management

Never ignore any aspect at the execution level for the sake of timely delivery or success confidence as this may create risk for business. The top-level should identify such areas and take appropriate actions.

f. Decisive response to the crisis

Never take time to decide on the incidents which may cause reputation risk to your business. You should do any of the following to handle such a situation:

i. Take strict actions

ii. Make changes in the management

iii. Make changes in the process

iv. Make the customer aware of his/her fault

5. Actions to be taken for Reputation Risk

Take the following actions on the identification of reputational risk:

a. Quick actions

b. Resolve amicably

c. Don’t hesitate to change

d. Open up

Key Outcomes of the Video

Protect your business from reputation risk by taking quick and appropriate action

Make required changes in the management to manage reputation risk

Do transparent reporting to assure the audience that your actions are right

Do regular and effective communication to build a strong brand reputation