Indians think more highly of themselves than they are. I am not making this up, it is a factually correct statement according to the Country report of Reputation Institute. Respondents ranked India 25th with 51.93 RepTrak score. According to its own evaluation, India deserved a score of 75.67 with 11th ranking. It is ranked 5th for having perception differences between internal and external reputation. A 25th rank among 50 countries ranked isn’t anything to talk about.
In the Companies Reputation report, there was no Indian company in the top 100. Yes, my ex-company Intel was ranked 16th, though its ranking has fallen from previous years. BMW, Sony and Walt Disney are the top three. Though reputation has a huge impact, most companies do not focus on it. Below is a chart from the Reputation Institute report on the impact of good and negative reputation of various factors.
Reputation Institute Company Report 2012
Customers, society, employees and investors – all are influenced by the reputation of the company. While companies may enjoy a good local reputation, as is the case for many Indian companies, maintaining a global reputation is a different ball game altogether. From the above chart it is clear, investing in a good reputation pays off and adds to the profit margin. Question is what all is required to build a good reputation. Another chart from the report highlights the main aspects:
Seven factors - leadership, performance, products/services, innovation, workplace, governance and citizenship are required to build a global reputation. For instance, Intel was among the top ten for – governance, workplace, performance, and products and services.
On the other hand, in respect of reputation damage, risk managers mostly focus on reputation damage due to misstatement of financial statements and governance. That accounts to just 28% of reputation. The impact on reputation of other aspects are generally ignored. The question is how can these be built into a risk assessment framework? Besides reducing downside risks, this gives a good option to leverage upside risks. Here are a few things that risk managers can look into:
1. Reputation map – Does the company have a reputation map covering these parameters and defining its progress through the years?
2. Integration level – Is reputation aspects integrated into all the functions of the organization, or is it left to the advertising and communications department?
3. External perceptions – Is the organization depending on advertisements to build its reputation or is it undertaking CSR and other activities also?
4. Participation in industry competitions - Does the organization participate and win industry competitions, for instance “great place to work”, “most innovative company” etc. ?
5. Social Media – How is the company using social media to build its reputation and manage the negative feedback?
6. Risk assessment - Is a risk assessment for reputation conducted to highlight the risks in all the seven areas and mitigation plans prepared?
Closing thoughts
Reputation damage is difficult to quantify and often the risks are not categorically listed. In social media environment, it is far easier to lose the reputation and more difficult to build a good one. In the present environment, they old age thinking - no news is good news - has become redundant. Just because the organization name hasn’t made headlines for the wrong reasons, it doesn’t mean all is well. The negative under currents slowly erode the good name of the organization. Hence, risk managers need to actively address reputation risks on all seven parameters.
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