Is Doing Nothing A Reputation Risk?

Tim Cook, CEO of Apple, recently issued an open letter on Apple website, publicly apologizing for the shortcomings in the Apple maps. The first paragraph reads:

“To our customers,

At Apple, we strive to make world-class products that deliver the best experience possible to our customers. With the launch of our new Maps last week, we fell short on this commitment. We are extremely sorry for the frustration this has caused our customers and we are doing everything we can to make Maps better.”

The purpose was to pacify the angry customers who found inaccuracies in the Apple maps. The words of the CEO mattered.

Now let us assume that none of the customers knew who the CEO of Apple is. They have not heard of the CEO before. The CEO visibility was zilch in media, social networks, business conferences etc. Would the words have mattered then? Wouldn’t the customers say – “Who is this guy? We never heard from him before and now he is giving excuses for horrid products?”

Managing an organization’s reputation is part of CEO/CXO job. When reputation risks occur, their communication is part of the risk mitigation plan. Hence, the effectiveness of risk mitigation plan is dependent on the CEO/CXO profile. Until here, I think you will agree with me.

Now let me ask you the difficult question. If the senior management of the organization does nothing to add to the brand or reputation of the organization, is it a risk?

Here is my argument. Normally, we take the following criteria for reputation risks.

Source- ICAI ERM Training Material

This measures only the negative impact. We talk about negative coverage in the media, but what about no coverage in media. In India, most of the CEO/CXOs have no media visibility and unlike the west, 90% do not give interviews etc. in the media. They even don’t have a social media presence and one can hardly find them directly interacting with customers. That is, except for traditional advertising of products in newspapers, magazines and television, there is no coverage of the organization and the senior management in the media.

Now let us see from risk management perspective. One of the strategic objectives of the organization is to build brand and reputation of the organization. The purpose of enterprise risk management is to give an assurance to the board that the entity is moving in the right direction to achieve its objectives. As risk managers, we focus if something goes wrong, but what if, the company is not moving at all in any direction – positive or negative – in meeting its objectives. Should we capture that as a risk?

Closing thoughts

Negative viral messages in social media tarnish a reputation in a span of few hours. It takes just one tweet to go viral. It will be very difficult for a company to defend itself if a company does not have a twitter account and reputation management plan. The same applies to executives. Now the thought process is either develop a brand or get branded. Silence gives an opportunity to others to put labels and develop negative perceptions. Continuous positive messages at a personal level need to go out about the brand for customers to have a favorable opinion. Doing nothing may become a huge risk.