Deloitte recently published its latest Reputation@Risk report, a global survey of hundreds of top executives. The main takeaway from this year’s report: the importance of reputation risk keeps growing, with 87% of respondents rating it higher than any other strategic risk facing their businesses. The top drivers of reputation risk listed by these executives were ethics or integrity issues, product or service concerns, security (both physical and cyber), and financial issues related to accounting or credit ratings.
Reputation risk: why is it so important?
Why has reputation become such a strong focus? Because these days it can change almost instantly. Decades ago, a company’s reputation was more or less the sum of what appeared in the mainstream media. That made it easier to control. Today, reputation is influenced to an equal or greater extent by decentralized processes on the Internet: search engine results, online customer reviews, social media activity, Wikipedia pages, and more.
Consumers and other stakeholders look to online sources for information on a company, yet there is no way to ensure that online information is accurate. That means a company’s reputation can be completely siderailed by misinformed blog posts or negative online reviews. That matters because more than 25 percent of a company’s market value is directly attributable to its reputation, according to the World Economic Forum.
Top causes of reputation risk
The Deloitte report makes it clear why top executives pay such close attention to reputation risk: of the respondents who had experienced a previous issue, 41 percent cited loss of revenue and loss of brand value as the biggest impact areas. In addition, as might be expected, the impacts of reputation threats were felt differently across industries:
IndustryGreatest ImpactConsumer and industrial productsRevenue and earningsLife sciences and healthcareLoss of brand valueTechnology, media, and telecomStock price changeEnergy and resourcesRevenue and earningsFinancial servicesRegulatory investigation
Protecting your company
It’s no wonder that the majority of Deloitte respondents said they were making reputation risk a priority in the coming year. Of those surveyed, a full 57 percent planned to increase the resources spent on reputation management, by investing in people, data, technology, and the development of reputation risk and crisis management processes. These kinds of preparations are crucial, because reputation threats often appear without warning. News stories and scandals go viral within hours via Facebook, Twitter, blog posts, and other online outlets, so the most successful companies are the ones that are ready before a crisis strikes.
What can we learn from the report? That reputation risk should matter to everyone, and that reputation risk has become a growing concern for executives across a wide range of industries. As the leaders in reputation management, we wholeheartedly support this shift. Our company has been at the forefront of protecting reputations for almost a decade — we actually coined the term “online reputation management.” As the experts in reputation management, we welcome the spotlight on our industry and its importance.