Litiigation management reputational risks p kagerer

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Litiigation management reputational risks p kagerer

  1. 1. | WHAT’s At Risk| Reputational Risk: Are You Protected By Patricia KagererG rowing up in El Paso, Texas, I often referred every bystander is a videographer — and every video can be to the social aspect of the city as a fish bowl. posted to the Internet in seconds. The voice and opinions of Everyone knew everyone. Even though any community member can reach potentially millions of El Paso has more than 800,000 residents, people with a simple tweet or a Facebook post. The evening the business community always felt like a news has taken a back seat to what is communicated via socialmuch smaller town. My mother always told me to “never networking channels.burn a bridge.” Mom’s advice served me well throughoutthe years by protecting my personal reputation as well as A public obsession with news combined with advanced tech-my professional one. nology has created a big risk for corporations, both large and small. The public is not fond of cheaters, supporters of sweat-Corporations have a similar risk when it comes to protecting shops, safety violators or environment polluters. At the samemaintaining and developing their own unique brand image. time, the public simply cannot get enough of a good story.Just a decade ago, when a catastrophic or public interest eventoccurred, corporations had to worry about what would be on Learn from Othersthe evening news and in the newspaper. Now, however, the In the last couple of years, we have witnessed the demise ofstakes are much higher. Through the advances of technology, companies and individuals due to missteps in communica-56 | LitigationManagement | summer 2012
  2. 2. tion and poor public perception on how they have respond- could come from events such as supply chain failure in prod-ed and handled difficult events. Take a look at BP, Toyota, ucts or services, safety violations or injuries, environmentalGoldman Sachs and Tiger Woods. All were instantaneously concerns or employee dishonesty just to name a few.judged — fairly or unfairly — on their actions and respons-es (or lack of) to the scandal affecting them. Taking a quick Step 2: Implement — Utilizing the image protection teamglance at these examples, we are reminded that it takes years to review the risk analysis and corrective measures taken toto build up brand recognition and reputation and just a split proactively create a working image protection plan is key. Thesecond to destroy it. goal is create an accurate document that is measured in qual- ity not quantity. For years the philosophy was that the moreMost risk management professionals complete comprehen- pages a crisis management plan contained, the more preparedsive assessments to determine the risk exposure to a company. a company would be. The reality is that a clear, concise, well-We focus on third-party liability risk, property, auto, human defined plan that is communicated and practiced well incapital, etc. Yet how corporations handle and respond to any advance of any crisis is essential. Periodic review, actual drillsevent that is made public has the potential to make or break a and training are critical to enhance the quality and value ofcompany. According to Brandt D. Beal, CEO of the Gibraltar the plan in the future.Group, “Reputation is a company’s greatest asset and has thepotential to be a company’s greatest liability. Often middle Step 3: Establish Cultural Awareness — The entiremarket and national accounts do not have a specific brand organization must be aware of the importance of image pro-management component in place.” As a result, Gibraltar part- tection to the organization. All employees can provide annered with Blake D. Lewis of Lewis Public Relations to ensure early warning for the potential issues or crises that can derailthat reputational risk is incorporated and addressed as part of a company. Employees can either enhance or detract for thean overall comprehensive risk assessment. reputation management initiatives. Culture does not happen overnight. It requires a clear definition of core values and aBeal explains, “Many risk managers are cerebral. They think dol- commitment to walking the talk. This leads to an overall com-lars and cents, tangible assets and liabilities. They plan for their mitment from everyone in the organization to do the nextexit strategy and crisis management after a loss. They know their right thing.crisis management procedures like the back of their hand. Yet theexit strategy for what to do to (protect the image of a company Risk Transfer Optionsafter a reputational risk event) is difficult to quantify.” Prevention and planning for potential reputational risk expo- sure is of paramount importance in this day and age. AlsoIn the past, silence was often considered the best option. In addressing the loss exposure when things do occur throughtoday’s social media-crazed world, silence may be the ruin risk transfer techniques is important as well. Beal recom-of a company. Risk managers must create a plan for how to mends discussing reputational risk transfer options at lengthget out in front of a bad rumor and how to tell and control with your insurance broker. “There are many ways to managetheir story. Lewis recommends that companies establish an this exposure in the insurance market today. Some are cost-image protection team comprised of leaders in several key effective. For example, adding a reputational risk endorsementdisciplines who can address the who, what, when, where, why to the first layer umbrella coverage can provide coverage forand how of navigating away from potential reputation risk managing the reputational exposure that is often overlooked.”and addressing head on any identified real or potential image It is important to determine the potential exposure that canissue. He recommends that the team have expertise related to be catastrophic and make an educated business decision as tooperational, facilities, community, financial and legal knowl- how your organization wants to handle the exposure.edge. Just as in any safety and risk management plan seniorleadership must buy in and be accountable for creating, con- Seventy percent of companies that have reputational catas-necting and supporting the program. trophe are not in business two years later. Have a plan. Share it with key team members. And most, importantly, don’tStep by Step create it, stick it in a binder and then never look at it again.There are three key steps to being handling reputational risks. Make sure you review it regularly. Every time there is a national crisis, pull out your own plan. Go through it, usingStep 1: Assess and Prepare — Similar to a risk and the crisis currently being played out to determine if any-safety assessment, the assessment and preparation for repu- thing needs to be re-evaluated. Learn from the experiencestational risk must address intangible costs related to potential of others. Having a plan that is a living document will ensurerisk exposure. Reputation management is largely based on that it is always relevant, which will help you not becomethe ability to anticipate the types of incidents the organization part of the 70 percent. LMmay sustain that would call their ethics and values in ques-tion. It begins with identifying what events could cause harm Patricia Kagerer is the Vice President of Risk and Safety Management forto customers, employees, suppliers or neighbors. The harm CF Jordan Construction, a Texas-based construction company. summer 2012 | LitigationManagement | 57

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