Corporate reputation and risk management
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Presentation by David Geddes, evolve24, at Smart Content: The Content Analytics Conference, October 19, 2010, http://smartcontentconference.com
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Corporate reputation and risk management
- 1. ©evolve24, 2010 Corporate reputation and risk management David Geddes, Ph.D. Vice President, Research & Development evolve24, a Maritz Research Company Saint Louis, Missouri New York, New York October 19, 2010
- 2. ©evolve24, 2010 2 About evolve24 • Global market intelligence through integrated analysis of traditional and social media • Integrated enterprise platform – Real-time document aggregation – Smart Content through advanced processing and analytics – Deep understanding of audience segments – Leading indicators of market shifts, risks and opportunities
- 3. ©evolve24, 2010 3 Approach 1. Document aggregation 2. Data processing 3. Analytics and rich tagging – Sentiment – Reputation – Risk – Topics and issues 4. Insights 5. Strategy and tactics
- 4. ©evolve24, 2010 4 Visualization of SmartContent
- 5. ©evolve24, 2010 5 What is corporate reputation? • Collective representation • Past behaviors • Expectations • Relationships • Networked world Sources: Duncan J. Watts & Peter S. Dodds (2007). Influentials, networks, and public opinion formation. Journal of Consumer Research, 34 and Communications Executive Council (2010). Influencing stakeholders in a networked environment.
- 6. ©evolve24, 2010 6 Where does reputation come from? What they do Reputation Customer experience What they say What is said about them Actions Words
- 7. ©evolve24, 2010 7 Where does reputation come from? Corporate actions Mainstream media Stakeholder impact Customer experience Media Mainstream media Social / WOM Social / WOM Exchange Relationships • Stakeholders • Publics Reputation • Cognitive & substantive • Affective & evaluative Social / WOM Mainstream media Customer impact Business outcomes
- 8. ©evolve24, 2010 8 Why does reputation matter? Resource Capital asset Sustainable competitive advantage Intangible Organizational goals
- 9. ©evolve24, 2010 9 What links Smart Content and reputation? • Agenda-setting theory – Scientifically-validated – > 400 research studies – Experimental studies – Corporate reputation
- 10. ©evolve24, 2010 10 What is risk? • State of uncertainty • Some of the possibilities involve a loss, catastrophe, or other undesirable outcome • Psychometric emotional risk model
- 11. ©evolve24, 2010 11 How do we manage using Smart Content?
- 12. ©evolve24, 2010 REPUTATION MANAGEMENT AND MUTUAL FUND CASH FLOWS Smart Content Case Study
- 13. ©evolve24, 2010 13 Situation • Leading mutual fund company • Cash flows ▲Industry peers ▼Client company • Management assumptions • Investment drivers
- 14. ©evolve24, 2010 14 Approach • Regression analysis of cash flows on financial variables and reputation Figure 1: Cumulative Funds Flows and xxxxx Reputation Equity (50,000) (40,000) (30,000) (20,000) (10,000) - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 110,000 120,000 130,000 140,000 150,000 160,000 170,000 180,000 190,000 200,000 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 fundsflows($millions) (7,000) (6,000) (5,000) (4,000) (3,000) (2,000) (1,000) - 1,000 2,000 3,000 ReputationEquity Cumulative Funds Flows (xxxxx) Cumulative Funds Flows / 10 (industry) Reputation Equity (xxxxx) Fund reputation Fund $ inflows Sector $ inflows
- 15. ©evolve24, 2010 15 Result • Primary drivers are financial • Significant role for reputation (R = .74)
- 16. ©evolve24, 2010 16 Application • Communications and outreach program – Trust – Performance • Largest gain in net flows in company history
- 17. ©evolve24, 2010 REPUTATION MANAGEMENT IN PHARMACEUTICALS Smart Content Case Study
- 18. ©evolve24, 2010 18 Situation • PharmCo, a major pharma company • FDA-ordered recall • Branded nutritional product
- 19. ©evolve24, 2010 19 Challenge • Listen • Organize and share • Understand stakeholder opinions – Cognitive – Emotions and risk factors – Messages • Identify • Engage • Fix
- 20. ©evolve24, 2010 20 Who was in the discussion? Visibility Sentiment Doctors Retailers Consumer groups Health orgs. Regulators JournalistsParents
- 21. ©evolve24, 2010 21 What were stakeholders saying? Stakeholder Key concerns Health organizations • Share information Medical professionals • Reassure parents Consumer groups •Open information access Parents • Loss of trust • Safety concerns • Quality • Price
- 22. ©evolve24, 2010 22 What were the emotional risk factors? Tuesday Wednesday Thursday Friday Saturday Sunday Emotional risk in product recall discussions Top 5 of 19 risk factors Vulnera- bility Dread Irreversa- bility Lack of control Untrust- worthy
- 23. ©evolve24, 2010 23 What were social moms saying? • Small reputation impact • Emotion drivers –Uncertainty –Irreversibility –Vulnerability
- 24. ©evolve24, 2010 RISK MANAGEMENT AND ALTERNATIVE ENERGY Smart Content Case Study
- 25. ©evolve24, 2010 25 Situation • Global manufacturer • European Union 20/20 alternative energy initiative • Corporate strategy and policy teams • European fiscal crisis • Political winds • Where to invest?
- 26. ©evolve24, 2010 26 Challenge • Monitor • Organize information • Gauge opinion • Weak signals • Threats • Anticipate • Reach out
- 27. ©evolve24, 2010 27 Political risk analysis by energy source Risk score Volume Events Weekly risk
- 28. ©evolve24, 2010 28 Political risk analysis: Wind by country Risk score Volume
- 29. ©evolve24, 2010 29 Political risk analysis: Topics and issues Risk score Risk contribution by topic Offshore wind Wind & economy Energy & jobs Wind opposition Wind & jobs
- 31. ©evolve24, 2010 31 Political risk analysis: Wind summary • Increased discourse ▲Wind ▲Renewables • Wind ▼More negativity • Energy and financial crisis ▲France, Spain ▼UK, Ireland, Greece, Bulgaria • Offshore vs. onshore ▲Debate ●Polarization
Editor's Notes
- Corporate reputation is a collective representation by stakeholder audiences of a firm’s past actions, results, and communications. Individuals and groups create, share, reinforce, and modify these representations … They are cultural constructs. Research shows that reputation has both cognitive and affective dimensions. Reputation encapsulates expectations by stakeholders about future behaviors of the corporation, and thus determines the relationships between the organization and its stakeholders. Corporations that routinely monitor, measure, and evaluate their reputation, risk, and the drivers of reputation and risk among specific stakeholder audiences will be able to identify opportunities and threats, develop action plans, and support the achievement of desired business outcomes. In a networked world, corporations must re-orient their listening in the competitive marketplace to be faster, smarter, and more stakeholder centric. By understanding, through content analytics, leading indicators of opinion trends towards a company, its brands, its products and services, and by understanding issues, topics, and market trends, companies can take steps to gain competitive advantage and protect themselves from risk. This presentation will look at applications of Smart Content.
- A strong reputation becomes a capital asset, a resource, a competitive advantage, and an intangible that the firm can manage to support organizational goals. A small but compelling set of studies does show a statistical relationship between corporate reputation and business outcomes. Positively affects stock performance Improves financial performance Attracts investment and lowers long-term cost of capital Dampens risk Helps attract customers and support growth Commands a price premium Supports stock price in times of uncertainty Adds to stock price by capturing intangible assets Intangibles lead to a sustainable competitive advantage
- Agenda-setting theory is thescientifically-validated link between a company’s presence in the media and reputation. Agenda setting theory was developed by Maxwell McCombs and Donald Shaw in 1968 General theory validated by over 400 field research studies around the world, primarily in political science Validated in experimental studies Extended to corporate reputation
- What is risk? Risk is a state of uncertainty where some of the possibilities involve a loss, catastrophe, or other undesirable outcome … with respect to issues and situations. Risk deals with the future … the unknown. Emotion comes into play. We worked with a team of academic neuropsychologists to develop a 19 dimension model of risk.
- Problem: Significant net outflow the client company funds over six year period. Assumption: The management felt that fund performance drove investment in their funds. Was there a relationship between net flows and shifts in perception about the company or its fund managers?
- Solution: A statistical evaluation to determine the potential contribution of Janus’ reputation into the investment decision of investors.
- Result: Relationship between reputation and net flows was found and led to the launch of a successful communications and outreach program focused on trust, versus performance, resulting in largest gain in net flows in company history
- Use content analytics to … Listen to stakeholders Organize and share information across the enterprise Understand stakeholder opinions Cognitive messages and opinions Emotions and risk factors Identify influencers Opportunities and threats Engage and communicate Fix the problem
- We could identify what the stakeholders were talking about. These are the rational, cognitive elements of the communications landscape.
- Vulnerability: A mommy blogger said: It is a sad commentary on our fast pace world that we can not even protect our innocent babes! Dread: An AP news story said: Worried parents have bombarded the maker of XYZ with phone calls and peppered Facebook and Twitter pages over fears about the top-selling [product] after millions of cans were recalled. Uncontrollability: A blogger said: “We were hitting with 3 to 4 devices and finally got through … Then after 8 to 10 minutes, we got a notice saying it’s been recalled.” Irreversibility: A new mother said on local TV news: "I was quite upset because we'd already fed him some milk from the powdered containers.” Untrustworthy: A father said on local TV news: "I'd say I've lost a little bit of faith in that brand. It was sold to us at the hospital when he was born.We were loyal to that product.”
- Uncertainty But, these kinds of emotions can have an impact on buying behaviors if they grow.