Managing Reputation Risk

(Managementfile - Risk) - Reputations have a close relationship with trust. Without a reputation, the trust does not exist. Reputation is a crucial component for a business, therefore, reputation risk should be managed properly.

Report of Ernst & Young on the Top 10 Business Risk 2009 showed that the position of reputation risk skyrocketed from position 22 years a2008 became the 10th of this year. This is likely because the world was rocked by the global crisis, potentially reducing the company's reputation.

According to findings from the Economist Intelligence Unit, reputation is one of the most important company asset, but it most difficult to protect. Reputation can be a competitive advantage, but the potential for damage, especially since the development of media and communications, regulations are more stringent, as well as decreased customer loyalty.

Reputation weakened when a business or organization to do things that missed expectations, such as poor Q3 results, having failed to pay (default), or exposed to certain scandal.

About two years, the world was rocked by the global financial crisis. This resulted in a reputation so the higher risk. A number of uncertainties about the business, financial condition of companies that are bad, unfavorable market conditions, the number of fraud and a number of other cases have led companies increasingly exposed to reputational risk.

Here are some steps you can take related to reputational risk:

1. Assessment
Perform an assessment of the reputation of your business out there. Identification of any perception that you can control. Second, create a policy to deal with reputation risk, reputation risk and make it as a consideration in discussions with management and directors.

2. Assess Decision
Consider the public perception for every decision taken. Public perception is very important, especially if your company is quite high profile and is known by the public.

3. Communication
Communication to all stakeholders have an important role, especially to maintain their trust to the company. If reputation is damaged, then public confidence in the company could fade.Convey financial condition in a transparent and accurate.

Communication here must include three elements, including:
• Concern: acknowledge that there are mistakes that happen, and express sympathy and disappointment
• Commitment: to express commitment to resolve the problem, and reveals the steps to be taken in detail
• Control: the leader shows that they managed to control the situation well

4. Good Corporate Governance
So far, most cases that resulted in the collapse of the company's reputation is the result of good corporate governance is not good.An example is the case of Enron, WorldCom, Satyam, until Sarijaya cases in Indonesia. To avoid cases that imposed a reputation like this, then good corporate governance should be run. Obey the rules and procedures, run the monitoring and periodic audits, detection of possible fraud and others.

The role of a leader is vital in doing this reputational risk management. A leader must determine the identity and ethics adopted by the company and the people in it. It was he who communicate the importance of maintaining a reputation to them.Meanwhile, the role of compliance is also important to make the rules, while maintaining that all rules, regulations and policies followed, monitored and reviewed regularly.

One of the biggest cases related to reputational risk occurs at Johnson & Johnson with Tylenol products in 1982. There are bad elements who put deadly cyanide into Tylenol capsules in stores and pharmacies in the Chicago area, killing 7 people who drank the poison capsule that was contaminated by it.

In response, Johnson & Johnson pulled 22 million bottles of Tylenol products they are in society, and bear no small loss, which is $ 100 million. It was the right decision from Johnson & Johnson, where they put the safety of the customers above profits.Furthermore, Johnson & Johnson's run of good public relations related to the case, so the Tylenol and then managed to return a best-seller. This is a great example of reputational risk management, which is already declining reputation can be repaired perfectly. In this case, communication had the strongest role.