Protecting the Priceless Asset of Brand Reputation

Posted on by Emma Monks

Protecting the Priceless Asset of Brand Reputation

Your company's reputation is a priceless asset. When the character and credibility of your brand are publicly called into question, the damage can have a lasting and dramatic effect on enterprise value.

A full-blown reputational crisis can knock millions off a leading brand’s value and the rise of social media usage has made reputational risk many times more challenging to handle and more urgent to manage. Suddenly, the incidents that can damage your reputation are less predictable, faster-acting, and more volatile, making harmful online content a systemic risk to brands.

Social media channels—from the social media platforms to user-generated forums—have given consumers the ability to easily impugn the reputation of a brand with negative reviews or by amplifying lapses in corporate ethics and integrity. These days, even issues that seem insignificant can become headline news, and reputations can be battered by thousands of hostile comments.

Reputational risks can come from unethical partners, agents, suppliers, contractors, competitors, or other third parties. They can also come out of the blue from extremist groups who misappropriate your brand without your knowledge or permission, a practice known as hatejacking. 

For communications leaders, this uncertainty can be paralyzing. How can you protect your brand’s reputation in the face of this sweeping assault? The good news is that you can dramatically reduce your downside risk and clear a path for continued growth and success.

It starts with maintaining a strong reputation because strong brands are more resilient and better positioned to prepare for the opportunities ahead.

JUDGMENT DAY IS HERE FOR BRAND REPUTATION

According to Harvard Business Review, the benefits of a good brand reputation extend to employee talent, product pricing, customer loyalty, and market value. Firms with strong, positive reputations attract better people, can charge a premium for products and services, have more devoted customers, and have higher price-earnings multiples and lower costs of capital.

As business markets head into a new reality for the remainder of the COVID-19 pandemic and beyond, communications leaders must be prepared for the unpredictable and unknown. Safeguarding corporate reputation and brand value is now firmly on the agenda of those who must act strategically before a crush of harmful content becomes a reputational crisis.

While reputational risk had traditionally been seen as an outcome of other business risks, this view has changed as it has become clearer that reputation alone is critical to the viability and resilience of a company.

It’s a vital issue today because the valuation of an enterprise is increasingly attributed to its so-called invisible assets. Enterprises are particularly vulnerable to reputational damage at a time when as much as 80% of market value is calculated to come from intangibles such as brand equity, intellectual capital, trust, and goodwill.

The 2020 Global RepTrak calls it “reputation judgment day,” when companies are “scrutinized on all aspects of their company: ethics, leadership, values, and beyond.”

Expectations have changed as companies have stepped outside of core business initiatives to take a stand on political and social issues. When brands are expected to deliver on financial performance while they make a positive contribution to society, reputational risks lie in wait everywhere.

The social media spotlight can be especially unforgiving as consumers increasingly disparage brands and call for boycotts when they disagree with a company’s social activism.

It’s not surprising, then, that a Global Survey on Reputation Risk of more than 300 executives by Deloitte found that reputational risk is at the top of the list.

Eighty-seven percent of the executives surveyed rated reputational risk as more important or much more important than other strategic risks their companies are facing. Eighty-eight percent said they are explicitly focusing on reputational risk as a key business challenge.

The survey found that companies are most confident about managing reputational risk drivers where they have direct control—such as risks related to internal misconduct and compliance—and least confident regarding risks perceived as beyond their control, such as external attacks and catastrophes.

Negative reputation events had the biggest effect on revenue, loss of brand value, and regulatory investigations.  More than 50% of the surveyed companies said they plan to address reputational risk by investing in technology, crisis management, and scenario planning.

The growing reach of social media makes it critical to manage customer expectations and perceptions. Clayton Herbert, group chief risk officer for Suncorp Limited, said, “With the increasing influence of social media and social media sites, as well as activist sites, issues can escalate very quickly. This can threaten your reputation more significantly than in the past.”

SAFEGUARDING AGAINST REPUTATIONAL RISK

Protecting the reputation of your brand is a major challenge that is often complicated by traditional company structures that aren’t designed to handle new and emerging risks from social media.

When risk is assigned to risk experts and reputation is assigned to corporate affairs or communications teams, the silo effect can hamper collaboration and delay the ability to detect reputational risks that can then quickly escalate into a major strategic crisis.

Contingency plans for crisis management are as close as some enterprises come to reputational risk management. This reactive strategy to limit damage after the fact doesn’t substitute for a solution that helps you identify emerging problems while there is still time to head them off.

A truly effective approach to managing reputation risk requires constant vigilance before, during, and after a crisis. Proactive early-warning risk intelligence that keeps you one step ahead of instigators with the ability to monitor social media 24/7/365.

With the early-warning advantage from real-time detection of reputational risks and high-priority alerts of incidents whenever they happen, communications leaders can be better prepared with a rapid response to avoid an escalation that could damage reputation, reduce revenue, or affect operations.

The ability to bounce back after you’ve been taken down is not enough today to guarantee your brand’s reputation. True resilience is about avoiding getting knocked down in the first place.

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