Due to the current instability in the business world, organizations should be able to anticipate changes and have coherent responses at hand to effective manage risks, create value, build good relations, increase profit and improve competitive positioning. A report titled Exploring Strategic Risk issued in 2013 for Forbes Insights by Deloitte, contains some very important conclusions for the business community. 300 executives from around the world were interviewed for the study, in an attempt to find out their vision of the risk strategy and current changes and analysing how organizations should face these new challenges. Sometimes it is difficult to link risks to a specific financial impact and not all data are pertinent to the evaluation of emerging risks. That's why companies have to be aware of internal risks and manage them well in order to be able to manage external risks and invest into strategic assets such as human capital, clients and innovation. This insight explains the case of the financial services as the sector that less trust generates due to its short-sightedness, lack of values and lack of professional education that resulted in corruption and bad practices, which compromised the financial sector. The report A Crisis of Culture: Valuing Ethics and Knowledge in Financial Services examines the role of integrity and knowledge in restoring culture in the financial services industry. The conclusions appear in the full version of this document. The financial industry is just one example in the wider panorama. Lack of values is widespread and creates significant risks. Bad practices trigger problems such as loss of profit, loss of reputation and even loss of shareholders, clients and employees. The crisis, as well as the arrival of new technologies, urges companies to maintain their good practices and emphasize aspects as ethics, leadership, commitment, performance, transparency and sustainability. The digital revolution and social networks encourage companies to be more transparent: companies meet their promises and obligations, deliver a coherent dialogue and improve the relationship with their stakeholders. Application of values raises the possibility of good results and profits for companies through improvement of their reputation and business as well as optimization of resources. This certainly creates competitive advantages, establishes a strong cultural connection and improves employees’ motivation. Before taking any decision, an institution should keep in mind the fact that it needs implicit and explicit public approval. Good business management implies risk management, creating a climate of trust, good will, credibility, social commitment and empathy between stakeholders and the company.

1. Effective risk management may help to protect the
value of assets in any company. Besides, it helps to
create value, build good relations, increase profit and
improve competitive positioning. Application of best
practices mitigates uncertainty and volatility. All
this means that risk management improves overall
management and expands the scope of opportunities
for organizations.
A report titled Exploring Strategic Risk issued in 2013
for Forbes Insights by Deloitte, contains some very
important conclusions for the business community. 300
executives from around the world were interviewed for
the study, in an attempt to find out their vision of the
risk strategy and current changes. A special emphasis
was made on the aspect of facing new challenges.
Key results of the Deloitte report are the following:
1) Strategic risk is turning into a key element for
companies throughout the world
2) Companiesarechangingtheirapproachtostrategic
risk management
3) Companies are successfully integrating risk
analysis into their overall strategy and planning
processes
4) Reputational risk is at the top of the agenda:
executives refer to reputational risk as the one that
may have the strongest impact on the business
strategy
5) Strategic risk management is among the priorities
of the Annual Shareholder Meeting and the
Management Committee
Sometimes it is difficult to link risks to a specific
financial impact. That is why companies such
as Siemens begin to change their traditional
quantitative approach to risk analysis in favour of
the qualitative approach, which helps to integrate
such data as regulations, communication media
and reputation.
Certainly, not all data are pertinent to the
evaluation of emerging risks. Anyway, one has to be
well aware of internal risks and manage them well
in order to be able to manage external risks. This
As a result of current instability in the business world, organizations should be able to
anticipate changes and have coherent responses at hand, in line with their strategy and
goals. Even if the corporate strategy is well thought-over and perfectly executed, the speed
of changes in the markets may undermine business, which means that the universe of risks
is expanding. In this scenario, it is essential to align the strategy with business risks.
Strategy Documents
I65/2015
Aligning Corporate Strategy
with Risks in Order to Avoid
a Crisis
Reputation
Insights & Trends
This document was developed by Corporate Excellence – Centre for Reputation Leadership and is based on the executive workshop Integrity,
Risk and Reputation, organized at Garrigues jointly with GEC Risk Advisory and Impact on Integrity, on June 17, 2014. Among other sources, the
document refers to Exploring Strategic Risk study carried out in 2013 by Deloitte for Forbes Insights.

2. Insights & Trends 2
Aligning Corporate
Strategy with
Risks in Order to
Avoid a Crisis
information helps to understand the importance
of investing into strategic assets such as human
capital, clients and innovation.
Lack of values leads to higher
risks for companies
The sector that has been most affected by risks, and
especially by lost reputation, is certainly the sector
of financial services. The crisis made companies
reconsider their understanding of the role of risks
and reputation.
Previously, extreme short-sightedness, lack of
values and lack of professional education resulted in
corruption and bad practices, which compromised
the financial sector. That is why the entire sector
had to be reformed. Key elements of this reform were
consolidation of the business culture, promotion of
ethical behaviour and in-depth education on the
mechanics of banking.
Since then the industry has focused on improving
its organizational structure and raising the value of
its main intangibles such as identity, culture and
reputation. It was the time of restating one’s vision,
mission and values, integrating them and being
dedicated to their implementation. It was a long
way to strengthening intangible assets at all levels
of organizations.
Banks, such as Barclays and Goldman Sachs,
launched an integrated revision of their culture and
practices, with an emphasis on client service and a
recovery of reputation. Initiatives launched by these
banks include defining who they are, what they do,
and how they should do it. All this is combined
with the objective to maximize shareholders’
returns and maintain good relations with the rest of
the stakeholders.
A Crisis of Culture: Valuing Ethics and Knowledge
in Financial Services is an Economist Intelligence
Unit (EIU) report, sponsored by CFA Institute. a
division of The Economist magazine on evaluation
of the ethics and awareness observed in the financial
services sector. The report examines the role of
integrity, ethics and awareness demonstrated by top
executives in the current process of recovering from
the crisis in financial markets.
Conclusions of the study include the following
insights: 1) Most of the companies tried to improve
their compliance with ethical procedures. However,
consumers are still not convinced whether the
sector may be associated with honesty. 2) The
industry’s top executives are conscious of the
importance of ethical behaviour. In fact, most of
the respondents believe that ethics is as important
as the firm’s financial success. 3) Executives do not
always see the benefits of greater compliance with
the sector’s ethical standards. Similarly, they believe
that considering the rigidity of the sector, new
approaches may interfere with competitiveness.
4) In order to consolidate financial services,
companies should make sure their personnel have
in-depth knowledge of the company, the sector and
even finance. 5) Companies should avoid failures
in communication and encourage alignment of all
departments.
Banking scandals that broke in 2008 led companies
to implement systems that allow them to evaluate
the behaviour of employees and raise ethical
standards. Companies choose between the
following two approaches: 1) strengthen their
behaviour procedures and promote them among
the employees, sometimes introducing financial
incentives for acting in line with the procedures;
2) reshape their workforce. That is why the UK
Human Resource Association claims that the
ultimate reform of the industry means “employing
a different kind of person”. This transformation
guarantees that all employees understand the bank’s
perspective and ethics. New employees should also
be willing to be engaged in the bank’s activities,
accept the culture and break down the silos in
order to enable all teams to take advantage of the
generated knowledge and synergies.
The financial industry is just one example in the
wider panorama. Lack of values is widespread and
creates significant risks. Fraud, conflict of interests,
wrongful appropriation, bribery and corruption are
some of the potential problems. These behaviours
then trigger problems such as loss of profit, loss of
reputation and even loss of shareholders, clients
and employees.
“Strategic risk
management
is among the
priorities of
the Annual
Shareholder
Meeting
and the
Management
Committee”
Graph 1: Q: Which of the following risk areas have the most impact on your
business strategy (three years ago, today and three years from now):
Source: Exploring Strategic Risk Study, carried out in 2013 by Deloitte for Forbes Insights.
2010 Today 2016
41 % Brand
28 % Economic trends
26 % Reputation
40 % Reputation
32 % Business model
26 % Economic trends
/ Competition
29 % Economic trends
26 % Business model
24 % Reputation /
Competition

3. Insights Trends 3
Aligning Corporate
Strategy with
Risks in Order to
Avoid a Crisis
Conclusion: good practices
and licenses to operate
The crisis, as well as the arrival of new technologies,
urges companies to maintain and strengthen their
good practices. Organizations clearly realize the
urgent need to comply with regulations. That is why
if a company wants to become the leader in its sector,
it may achieve necessary support and legitimization
by emphasizing such aspects as ethics, leadership,
commitment, performance, transparency and
sustainability.
The digital revolution and social networks encourage
companies to be more transparent. This nudges
companies towards a more organic and strategic
approach as well as meeting all their promises and
obligations. The ethical dimension also helps
companies to develop their relations with the
stakeholders and the society.
A company that wants to offer a competitive and
strategic response and be able to anticipate the needs
of the market surely understands the importance of
developing a resistant and coherent culture based
on integrity, mutual understanding, integrated and
cross-function management. In this context, doing a
good job and communicating this to the public is no
longer sufficient. The public expects something else
from organizations, and each organization should find
out what the expectations of different stakeholder
groups are.
Application of values raises the possibility of
good results and profits for companies through
improvement of their reputation and business as well
as optimization of resources. This certainly creates
competitive advantages, establishes a strong cultural
connection and improves employees’ motivation and
satisfaction.
Before taking any decision, an institution should
keep in mind the fact that it needs implicit and
explicit public approval. This reality is expressed
in the principles developed by the Arthur W. Page
Society, named after the expert considered the
founder of modern public relations. Page believed
that “in a democratic country, any business starts
with public approval and exists as long as this
approval holds”. Good business management implies
risk management, creating a climate of trust, good
will, credibility, social commitment and empathy
between stakeholders and the company.
“The
financial
industry
is just one
example in
the wider
panorama.
Lack of
values is
widespread
and creates
significant
risks”
Graph 2: Financial services industry es the least trusted to do the right thing by general
public (% of respondents)
Source: Edelman Trust Barometer, 2013.
73 %
70 %
66 %
62 % 62 % 62 % 61 % 61 % 60 % 60 %
57 % 57 %
55 % 54 %
51 % 50 % 49 %
46 %
Technology
Consum
er Electronics M
anufacturing
A
utom
otive
Foods
Beverage
A
erospace
Defense
Entertainm
ent
M
etals Industry
Food
M
anufacturing
Telecom
m
unications
Consum
er Packaged
G
oods
Pharm
aceuticals
Energy
Consum
er H
ealth
Com
panies
Brewing
Spirits
Chem
icals
M
edia
Banks
Financial Services

4. Leading by
reputation
©2015, Corporate Excellence – Centre for Reputation Leadership
A foundation established by major companies aiming to excel in the management of intangible assets and facilitate promotion of strong brands
with a good reputation and a capacity to compete on the global markets. Our objective is to become the driving force, which would lead and
consolidate professional reputation management as a strategic asset, fundamental for building value of companies around the world.
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