How do you price reputational risk? Was it simply something that could be taken as a percentage of revenue or net profit and then just slapped into a spreadsheet or even a balance sheet? And the question was not theoretical either as there was pressure, coming from board level, to do just this. To be honest this is an extremely difficult question to answer.
Diana Bentley examines some of the practical steps when preparing for and responding to crisis — and how credibility can be restored. Despite the fact that many companies today have improved their governance, the regular flow of news highlighting Operational and reputational risk in the wrongdoing, unethical behavior or incompetence has increased public scepticism about responsible business conduct.
While some cases involve deliberate failings and others do not, the outcome is often the same: Although the operational risks facing organisations vary according to the nature of their business, the reputational damage they can suffer often stems from a common route. In advising companies on damage mitigation, Scott has noted the shift in the responsibilities of in-house counsel.
Meanwhile, the downside of technology advances are the risks of breaches of company data and know-how. Evidence of this shift is abundant.
In the United Kingdom, for instance, global firms such as Starbucks and Google have suffered bad publicity from paying small amounts of UK tax, or none at all, despite the legality of their tax arrangements.
Such changes in public sentiment have been influenced by the revolution in digital communications, particularly social media. The rapid and widespread dissemination of information from reliable — and unreliable — sources can be crushing, and reputational damage can now arrive faster and be far deeper.
Anticipating damage Along with operational risk, reputational risk is now an intrinsic focus of crisis management plans. At energy giant Shell, a dedicated risk management team creates scenarios for different types of risk. Lawyers are fully involved in the process, and both business units and legal teams also undertake scenario planning, short and long term.
Cowan believes, however, that it is now important to consult more broadly in this process. Being in contact with people from more diverse backgrounds would help us be more robust in anticipating unexpected events, and how to prepare for and respond to them. Companies need crisis management plans and teams in place and, if they produce consumer goods, a good product recall policy.
But they really need to practise, modify and improve them, based on simulations.
Such initiatives, he says, are not intended to hide the truth, but rather should help employees more accurately convey it: The right response Problems, when they occur, can present a range of challenges, from regulatory investigations and public hearings, to product recalls and litigation.
An essential starting point is gathering as much information on the issue as possible and determining what is happening, so that an appropriate strategy can be formed. Out of this matrix of experience, you then pick out who needs to be in the room and what you need to do.
Whatever the range of work that needs to be done — including for lawyers — the gathering and preservation of evidence and communications are vital.
Making statements that are inaccurate and damaging is a common mistake.
Who will speak for the organisation is also a key consideration. An effective spokesperson in times of crisis is invaluable, and that person needs to be identified and given the resources they need to succeed, says Fowler.
Problems with social media comment now, he stresses, only reinforce that organisations need to be as proactive, open and forthcoming as they can be to prevent misstatements and speculation of others filling the void.
Problems should not be dealt with in a piecemeal fashion, urges Fowler. A steady stream of new revelations, and a widening scope of the problem, erodes confidence in the company's ability to deal with the problem. If an organisation recalls a narrow product range only to recall an even wider range of products later, this can call into question the fitness of its other, non-recalled products as well.
Lawyers note that now, while the legal position and concerns about admissions of liability must be clearly stated, they must be balanced against what the right response may be from a reputational standpoint. If an apology is withheld when one is expected, the damage may be aggravated.
External advice While in-house counsel can provide a calm advisory head internally, external counsel can contribute much in crisis management situations.
Additional manpower or a particular expertise not available in-house may be needed. Along with helping evaluate the legal risks of possible courses of action, they can contribute in other ways, explains Cova.
Sometimes, they can offer a broader perspective: William Clutterbuck, Vice Chairman of corporate communications consultancy, Maitland, notes: Isolating the exact extent and nature of the damage is a good starting point. If the problem is related to one person or a group, the solution may be as simple as replacing them with others who are trusted — a situation that can often happen when a regulator is involved, says Bruno Cova.
Clutterbuck has some reassuring and simple suggestions: You have to try to be a helpful player in society.Charities can face a wide variety of risks which could affect their beneficiaries if not dealt with properly.
A risk is any event that could prevent a charity achieving its aims or carrying out. operational, financial, and reputational risks Determine and prioritize risks to aid in developing the internal audit plan, helping to provide the Compliance risk assessments The third ingredient in a world-class ethics and compliance program 5 Determining residual risk.
Reputational risk is not a new concept, but the efforts to manage it as a self-standing type of risk and not within an operational risk framework are quite recent.
BNM/RH/CP Prudential Financial Policy Department Operational Risk Management Page 4/23 Issued on: 27 June c. paragraph is only applicable to a large financial institution or an active. The term operational risk management (ORM) is defined as a continual cyclic process which includes risk assessment, risk decision making, and implementation of risk controls, which results in acceptance, mitigation, or avoidance of torosgazete.com is the oversight of operational risk, including the risk of loss resulting from inadequate or failed internal processes and systems; human factors; or.
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