Case studies on reputation risks management and reward and how a business can build a fortune just on reputation.

1. Managing Reputational Risk
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The quest to outwit the competitor for market share and dominance has its price; it
seems we forget that footprints are left in the paths we’ve once walked in. Most of
the time our actions influences those that we don’t have contact with or may never
meet. Business leaders with guerrilla mind set may probably disagree. Reputation is
historic as your business will be referred to by its actions not its intentions. A similar
action or inaction over a period of time defines reputation.
Goldman Sachs Group Inc. was one financial services company that got its
reputation mired. MarketWatch reputation ranking of Goldman Sachs in 2012 was
below 50(49.39). Most Americans believed the company was responsible for the
financial crisis. It had one of its employee’s, Greg Smith post his resignation letter in
the New York Times arguing that the company’s employees put their interest above
that of their clients. With such sensitive information filtering into the public, anxiety
among stakeholders was inevitable. In Interbrand’s most recent brand ranking,
Goldman’s value declined by 16% in fact 76% of most Americans believes that
Goldman Sachs will not act in their best interest.
The Insurance Giant, AIG was rated amongst the least reputable companies five
years in a row. The company refused to accept a bailout offer from the US
government during the financial crisis. Recently it championed a campaign ad
explaining to stakeholders that it had returned all the money the government lent it
during the crisis. At the same time, it threatened to sue the government for high

2. interest rates and other restrictions on the company that were not in the best
interest of its shareholders. They eventually weighed the consequences and
dropped the suit but not before the bashing of their reputation.
The automaker Volkswagen diesel emission fraud news hit the public space in 2015.
Engineers had installed soft wares that would manipulate emission on about 11
million diesel vehicles. Martin Winterkorn (CEO) led VW through a series of events
that led to the scandal. Winterkorn admitted no wrong doing. Critics were
sceptical amidst VW ruthless culture and ambition to be the largest automaker. The
reputational damage is far from over. A man’s action can bring fortune to a course
or pull down years of hard work.
FIFA president Sepp Blatter and Michel Platini presided over the association masking
as reformers and house cleaners. The duo were indicted in connection with 9 senior
officials and 16 others. Blatter and his heir were banned for 8 years. They still protest
their innocence in the whole mess. However Blatter has not been able to provide a
written contract regarding the sum of $2 million paid to Platini by FIFA in 2011.
In developing economies, the case is not any different, however it seems damaged
reputation could be rebuilt faster in this environment than in developed economies.
Once the individual, association or business comes up with feeble measures
probably with the influence of the government through some monetary
compensation to isolate wrongful acts, those acts are quickly forgotten and
covered up. The fellow suddenly becomes acceptable in the minds of friends,
allies, and eventually the public. No one takes full responsibility, little or no
disciplinary measures are taken. Resignations are rare and involuntary. “After all
everyone makes mistakes and we just have to move on”. The autocratic leadership
style and the high level of poverty in these economies have in a way crippled
public opinion, protests are weak and inconclusive. The tenacious grip to power
and lack of basic amenities among many other socio-economic and political issues
stifles the will and power to decide or challenge the government. This timid attitude
to life has in turn transcended into the socio-cultural behaviour of the people. This
behaviour now reflects in their daily living, business and general outlook to life. In
the long run, the leader’s actions not only affects him, the people he leads suffer
greatly.
A business as a legal entity is separate from its owners, however, the owners are
responsible for how the business acts and is perceived by the public. Forbes Media
ranked Google second behind BMW and above Daimler as the most reputable
company in the world for 2015. These companies implemented good corporate
governance and applied a unique corporate social responsibility amongst other
factors. Reputation toyed with could cost a business lots of fortune or wipe it out
entirely. Lehman Brothers, Enron, and Barings got it wrong in pursuit for unrealistic
financial compensation. This has put them up as case studies for financial reckless.
Companies are beginning to focus on a robust enterprise risk management

3. framework that would curb top management excesses and manage other
reputational risks areas in business. The issue of reputation is usually at the top.
Reputational risk management can be effective when Leaders take on the risk
oversight function where you have a board. The risk management committee takes
on the risk review. The risk management function takes on risk management. The
business units become risk owners and executes laid down policies.
Reputational risk framework requires business units to establish their own processes
through which they can be assessed. Risk parameters will be set and key risk
indicators assigned amidst other evaluation and monitoring tools. The board must
implement sound business ethics and governance for this to work. This ensures
accountability, ownership and stability. Regulators encourage a review of risk
management policies not later than one year.
References: Fortune Mag, MarketWatch, Forbes Media.
By: Chinedu Ozulumba
Author Name: Eddu Oz
Blog: www.aspirebyforce.com