REPUTATION & RISK – INSEPARABLE TWINS
Every organization has a reputation . . . some good, some bad.
Executives rise or fall with those reputations, too.
What about reputation itself? People worry about it. They defend it – even in court. But how does an organization’s reputation really get started?
Reputation is created! Who are its creators? Decision-makers whose values and priorities about managing risk build a framework that creates a reputation. Like love and marriage, risk and reputation go together.
Though it seems obscure – even mysterious, reputation develops in one of two ways. Either it is consistently formed – or it has to be restored after it’s lost. Both involve risk. The key to both is successful management of risk.
A long-standing excellent reputation can seem fixed and stable – but be destroyed in a moment . . . by a single unexpected act or occurrence!
Consider the luxury cruise liner Costa Concordia now lying capsized off the Tuscan island of Giglio. Only a small deviation from its programmed route caused it to slam into a reef and roll over! Instantly wiped out was not only the reputation of its owner Carnival Corporation but the entire popular cruise ship vacation industry’s reputation was impacted as well!
With that evaporated reputation went depressed stock value, major financial loss, immediate lawsuits, cancelled cruises and embarrassing news media coverage.
In contrast, the now-famous but nearly disastrous Tylenol product tampering case proved resilient against impact. Its reputation was in sudden jeopardy. But by excellent foresight about risk – realizing a criminal act could destroy its reputation, Tylenol was able to rapidly implement pre-planned re-packaging that preserved the company’s reputation.
Recovering reputation – after it is lost – is a different ballgame. Will Penn State football ever regain the reputation Coach Joe Paterno took a half-century to create?
Once a good reputation collapses, crisis managers typically rush in like emergency physicians to resuscitate and restore it. But reputation recovery takes more than apologies, explanations, and panicked reaction. Inherent but overlooked risk must be systematically identified, evaluated, ranked, and controlled.
So a good reputation emerges as one more advantage of systematically keeping on top of all risks! And every CEO and Board Member will enjoy the benefits. Fight on -- risk managers everywhere!
