Avoid an identity crisis: a fast-changing environment has forced companies to take a fresh look at how they manage reputational risk. A new wave of corporate scandals has accelerated that process.
| Author | Holmes, Lawrie |
| Position | Company overview |
The arrival of social media was heralded as an exciting addition to a set of channels through which companies could market their products and services effectively. As consumers became a more discerning and increasingly fragmented body, companies recognised the value of this very direct form of marketing. With an eye on the bottom line, corporates relished communicating to end users in such an economical way.
But a wave of recent scandals has brought on a wider understanding of the impact of social media. Although consumers may approve of a product or service through social media, it is more likely to be used for expressing a dislike for a company's offering. In this context, powerful and easily identifiable brands, which for generations have been the emblem of corporate success, can become an Achilles heel if a well-defined reputational risk strategy is not put in place.
Reputational risk relates to the damage that can be done to a company's profile--something that is increasingly important whenever larger elements of corporate value are tied to brands and other intangible assets.
"Reputation is an incredibly valuable but vulnerable business asset," says Rod de St Croix, a partner of London-based PR and communication consultants 3:nine. "Today, firms' reputations are at risk like never before. Digital channels such as Twitter can be used to spread uncorroborated negative messages quickly. So your reputation must be protected and managed with the utmost care."
The most successful firms know this and take reputational management very seriously, says de St Croix. "Their ability to weather a crisis can be a good indicator of their reputational strength. Firms riding high on their reputation only need make one ill-judged slip to fall from grace. Recovery is possible, but a scar is invariably left behind and sometimes the wound is fatal. No company is immune and the higher your profile, the greater you are at risk."
Food for thought
No issue could have had a greater impact on consumer behaviour than the recognition that horsemeat had entered the food chain across Europe earlier this year. Such was the danger to reputation that those supermarket and restaurant groups affected were swift to address the issue, knowing full well the online carnage that would have ensued, followed by share price collapses, a management rout and business implodes.
There have been plenty of other major issues that have damaged companies' reputations in recent months...
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