Reputation

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Korea Univ. Seungho Oh

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Reputation

  1. 1. Reputation Risk Management Alchemist
  2. 2. Nate, Cyworld Security Breach Puts Private Info of 35 Million at RiskThe Korean Communications Commission (KCC) annaounced today that hackers had broken intoNate and Cyworld, potentially exposing the personal details of some 35 million members of the two sites. How are you going to act?
  3. 3. proactiveReputation Risk Management Crisis Management
  4. 4. There has been no Reputation Risk Management Financial Risk  Reputation Risk Operational Risk • Difficulty • Factoring into Capital Adequacy • Basel II Intenationl accord for regulating requirment capital requirements for large international banks • Operation risk – The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. How to Measure – Excludes Reputation Risk Quantify Recognize as Capital ?
  5. 5. Example – Current StatusA Large US Pharmaceutical CompanyRelatively Well-doing company For Operational Finacial Risk  For Reputation Risk • COSO Framework • Evaluation of Problems that could affect Reputation • Committee Of Sponsoring Organizaions of the Tradeway • Problems Commission – Pending lawsuit – Weak product-testing • Framework for procedures Enterprise Risk Management (ERM) – Product-liability concerns – Control systems for detecting fraud • Only when Major Decisions • Involving aquisitions • Informally • Unevenly
  6. 6. Example – Current StatusA Large US Pharmaceutical CompanyRelatively Well-doing company For Operational Finacial Risk  For Reputation Risk • COSO Framework • Evaluation of Problems that could affect Reputation • Committee Of Sponsoring Organizaions of the Tradeway • Problems Commission – Pending lawsuit – Weak product-testing • Framework for procedures Enterprise Risk Management (ERM) – Product-liability concerns – Control systems for detecting fraud • Only when Major Decisions • Involving aquisitions • Informally • Unevenly
  7. 7. There has been no Reputation Risk Management Financial Risk  Reputation Risk Operational Risk • Difficulty • Factoring into Capital Adequacy • Basel II Intenationl accord for regulating requirment capital requirements for large international banks • Operation risk – The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. How to Measure – Excludes Reputation Risk Quantify Recognize as Capital ?
  8. 8. TrainingIQ AAA How SMART are U ? GPA Note taking AA Go to Library SSAT Buy Textbooks BBB DCAT Solve Problems BB Strategic / Determinants Criteria Steps Inteligence Reputation Assess Reputation AAA Evaluate Reputation-Reality Gap Reality AA Close Gaps Belief & Expectations Changing Monitor Changing belief & expectations BBB Weak Internal Coordination Put ONE person in charge BB Strategic/ Steps Criteria Determinants Reputation Risk How to Measure Quantify ? Inteligence Reputation Reputation Risk Recognize as Capital
  9. 9. Determinant and Step Reputation - by Others • • events Several Environment-friendly • RefineryExplosion • Positioned as a - killing 15 responsible corporation • Leak in a that cares about the corroded pipeline Reputation-Reality Gap environment at Prudhoe bay • “Beyond Petroleum” Changing Belief & Expectations • Allegations of campaign tax evasion in Weak Internal Coordination • Russia Multibillion-dollar initiative • Allegations of to expand ots alternative- propane market business Criteria / Determinants energy manipulation Assess Reputation Evaluate Reality Reality – by Me Reputation - by Others Close Gaps Strategic Steps Gap
  10. 10. Determinant and Step  Assess Reputation Reputation-Reality Gap • Media AnalysisChanging Belief & Expectations • Most important – Rather than surveys Weak Internal Coordination » From Customers, Employees, Investors, NGOs • Media Strategy Criteria / Determinants • Stay above Awreness threshold • Make Stories in leading media Assess Reputation – Over 20% to be positive Evaluate Reality – Less 10% to be negative Close Gaps • Secure Share of voice – Over 35% to keep negative stories minimum – Over 50% to win critics Strategic Steps • Having complete context • Reputation of a company is a function of – Others reputation – Relative reputaton of the industry overall
  11. 11. Determinant and Step  Evaluate Reality Reputation-Reality Gap • Objective EvaluationChanging Belief & Expectations • Pitfall Weak Internal Coordination – Overestimating own capabilities – Believe they have good reputation Criteria / Determinants • Measurement Assess Reputation – Contextual Evaluate Reality – Objective Close Gaps – quantative Strategic Steps
  12. 12. Determinant and Step  Close Gaps Reputation-Reality Gap • Actual character > ReputationChanging Belief & Expectations • Strengthen reputation by Weak Internal Coordination – Investor relations program – Corporate communications program Criteria / Determinants • Reputation > Actual character Assess Reputation Evaluate Reality • If unjustifiably positive Close Gaps • Should do either – Improve its capabilities, behavior, performance – Moderate stakeholders’ perceptions » In careful, measured ways Strategic Steps
  13. 13. Determinant and Step• GE in 2005Leading Company A • Ecomagination initiative – Doubling its R&D Reputation-Reality Gap investment in Developing Cleaner Technologies Changing Belief & Expectations – Reduced greenhouse Weak Internal Coordination emissions Criteria / Determinants • New Expectation created – Companies to be eco- friendly Assess Reputation Evaluate Reality Close Gaps • Painkiller Vioxx Monitor Changing Belief & Expectations • Caused Heart attack • New Expectation created Strategic Steps Adhere to old standard – Drug companies to disclose more detaild results and analysis of clinical trials
  14. 14. Determinant and Step  Monitoring changing Belief & Expectations Reputation-Reality Gap • Regular surveys Changing Belief & Expectations • From employees, customers, other stakeholders • Whether data suggests that Reputation-Reality gap is Weak Internal Coordination materializing or widening • Experts surveys Criteria / Determinants • Political, Demographic, Social trends • Influencial NGO Assess Reputation • Activists Evaluate Reality – Environmental, Wages, Working Close Gaps conditions, Labor practicesMonitor Changing Belief & Expectations • Media monitoring • How fast and to what extent belief and expectations change Strategic Steps
  15. 15. Determinant and Step  Weak Internal Coordination • Marketing department vs. Developers Reputation-Reality Gap • In Software company • Large advertising for a new product Changing Belief & Expectations – Before developers identify bugs Weak Internal Coordination Criteria / Determinants  Put ONE person in charge Assess Reputation • In charge of all those 5 steps Evaluate Reality • Candidates Close Gaps • Can beMonitor Changing Belief & Expectations Put ONE person in charge – COO, CFO, – Heads of Risk management, Strategic planning, Internal audit Strategic Steps • Cannot be – Heads of Marketing, Corporate communications, General counsel

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