Given this lack of common standards, even demanding companies have only a fuzzy idea of how to manage reputational risk. A large U.S. pharmaceutical company reflects the current state of practice among well-run organizations. It has an ERM system for managing operational and financial risks, as well as the dangers of external events such as natural disasters, loosely based on the COSO framework. The Vice President of Enterprise Risk Management oversees the system. However, the company only manages reputational risks informally – and unevenly – at the local and product levels. Your leaders only consider reputational risks when making important decisions, para. B example in connection with acquisitions. (The company`s due diligence process includes assessing issues that could affect reputation, including ongoing litigation, weak product testing procedures, product liability concerns, and poor control systems to detect management fraud.) The Vice President of Risk Management says reputational risk is not included in the long list of risks for which he is responsible. So who is responsible? The CEO, the vice president suspects, because he oversees the company`s sophisticated crisis response system and is ultimately responsible for managing events that could damage the company`s reputation. This pharmaceutical company is not alone. Contingency plans for crisis management are as close to reputation risk management as most large and medium-sized businesses. While such plans are important, it`s a mistake to confuse them with an ability to manage reputational risk.
Knowing first aid is not the same as protecting your health. Your reputation depends on how people perceive your business. All correspondence – whether emails, letters, voice messages or other means of communication – must always be polite, informative, professional and grammatically correct. Although Milner`s quote is meant to reinforce the sense of her character, she still leaves behind the uncomfortable truth to be reckoned with: her reputation is at the mercy of the opinions of others. "Corporate reputation" is a simple term for how a company is perceived by others. But since the 1980s, attempts have been made to define it more formally and to distinguish reputation from related constructs such as corporate image, identity, brand value and status. Leaders know how important their company`s reputation is. Companies with a strong positive reputation attract better people. They are perceived as more valuable, which often allows them to charge a premium. Your customers are more loyal and buy a wider range of products and services.
Since the market believes that these companies will generate sustainable profits and future growth, they have higher price-to-earnings ratios and market values, as well as a lower cost of capital. Moreover, in an economy where 70% to 80% of market value comes from hard-to-value intangible assets such as brand equity, intellectual capital and goodwill, companies are particularly vulnerable to anything that damages their reputation. Reputation is important to the individual, because a favorable reputation brings us what we want in life - safety, friends, self-esteem and happiness. Because it`s true – that reputation is more than our identity or actions – we have to admit that some aspects of reputation are out of our control. In this data-driven article, I`ll address two crucial questions: Why is reputation important in business? And why is it important to have a reputation management policy? Branding is what comes to people`s minds when they think of your brand. You shape your personality, refine your communication, define your characteristics and choose a position. And for what purpose? They build reputation capital. Fast forward to 2019, and corporate reputation accounted for 35% of the total capitalisation of the world`s top 15 stock market indices, according to a study by AMO, while the UK`s FTSE 100 reputation factors contributed to almost 50% of the total market capitalisation. Of course, organizations that truly meet the expectations of their various stakeholders may not be fully recognized. This often happens when a company`s reputation has been significantly damaged by unfair attacks by stakeholders or inaccurate media coverage. It can also happen when a company has made real progress in solving a problem that has damaged its reputation, but cannot convince stakeholders that its progress is real. For example, Chrysler, Ford and General Motors have improved their cars so much that the quality gap between them and the vehicles of Japanese companies had narrowed significantly by 2001.
But to the frustration of the big three, consumers remain skeptical. Since reputation is perception, it is perception that must be measured. This makes it possible to assess reputation in several areas in a contextual, objective and, if possible, quantitative way. Three questions to be answered: What is the reputation of the company in each area (product quality, financial performance, etc.)? What for? How do these reputations compare to those of the company`s competitors? Corporate culture is an expectation of behaviors within the company for employee interactions and external business interactions. .