Saving reputations in turbulent times.

• Author: Bonime-Blanc, Andrea
• Position: Ethics Corner

We live in the age of hyper-transparency and super-connectivity. Technology-enabled social media has given way to an unprecedented time of global communication, information access and the ability of just about anyone--from the private citizen in a war zone to the president of the United States --to disseminate the good, the bad, the ugly, the fake and the real, with unprecedented speed, at any time of day or night, to anyone and everyone, anywhere.

Given this reality, companies have some new things to deal with. One of them is the increased and confusing organizational reputation risk, as distinguished from personal reputation risk--though the two can also be interrelated. It's the dawn of a new era and businesses would be smart to prepare for turbulent times where traditional risk and crisis management need to adapt quickly to this novel form of reputation risk.

Reputation risk management is not the same as reputation management, which is all about image, brand and external relations with stakeholders. Reputation risk management requires effective enterprise risk management at the management level and effective strategic risk governance at the board level. Indeed, reputation risk is one of the key strategic risks all boards should be overseeing but few do. Therein lies some of the disconnect and trouble when a crisis hits.

Reputation risk is defined as an amplifier risk that layers on or attaches to other risks--especially environment, social and governance risks--adding negative or positive implications to the materiality, duration or expansion of the other risks on the affected organization, person, product or service.

Reputation risk can affect any underlying risk--amplifying and accelerating it--and it will do so negatively when the organization is not prepared to deal with a risk gone wrong or associated crisis. However, the organization that understands its underlying risks and is prepared to deal with them when the inevitable crisis comes, may actually be able to pull off a reputation opportunity event--where the deft handling of the crisis will reinforce the positive expectations of stakeholders.

A short list of some of the reputation risk cases seen over the past few years and their underlying amplified risks would include: Anthem, Target, the U.S. Office of Personnel Management and Sony Entertainment in the cyber-risk realm; BP in the environment for health and safety; corruption at Brazilian oil giant Petrobras; airbag...