Corruption, cyber attacks, product safety recalls. These are problems that can ruin a company’s hard-built reputation and corporate executives aren’t taking the risks lightly.
A recent survey of 300 executives worldwide found that protecting their companies’ reputations and managing the risk is a top priority and, for some, a matter of survival.
The survey by Deloitte Touche Tohmatsu Limited and Forbes Insights said 87% of the executives surveyed rated risk as “more important’’ or “much more important’’ than other strategic risks facing their company.
Eighty-eight percent of respondents said their companies are explicitly focusing on managing reputation risk as a key business challenge. The survey showed that a reputation risk that’s not managed properly can quickly escalate into a life or death issue.
“There’s been a recognition that with the increasing influence of social media and social media sites, as well as activist sites, issues can escalate very quickly,’’ said Clayton Herbert, group chief risk officer for Suncorp Limited, an insurance and financial services firm in Australia. “This can threaten your reputation more significantly than in the past.’’
Indeed, the stakes are high. According to a study by the World Economic Forum, more than 25% of a company’s market value, on average, is directly attributable to its reputation. Factor in the fact that a company’s reputation can be tarnished in just a few keystrokes, and that percentage is only getting higher.
The 2014 Global Survey on Reputation Risk found that the responsibility for reputation risk lies with the company’s top executives. About 36% said it was the role of the chief executive officer, followed by the chief risk officer (21%), board of directors (14%) and chief financial officers (11%).
Even though most said their reputations were strong, they aren’t unshakeable. Only 19% of companies surveyed gave themselves an “A” for ability to manage risk. The majority (57%) gave themselves a “B.”
The top reputation risks cited were those related to ethics and integrity, such as fraud, bribery and corruption. Next were security risks, including cyber breaches, followed by products and service risks involving safety, health and the environment. Also emerging were risks associated with a company’s third-party suppliers and vendors.
The findings were based on a survey of C-Level executives, board members and risk executives from major industry sectors: financial services, consumer/industrial products, technology/media/telecommunications, life sciences/health care and energy/resources. All were from companies with annual revenues exceeding $1 billion.
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