Dr Deborah Pretty, founding director, Pentland Analytics presents risk managers with new evidence on the dynamic between reputation risk and shareholder value.
Businesses are risking being categorised as ’winners or losers’ as a direct result of a reputational crisis if they do not take this risk seriously.
Speaking at the sixth annual Risk Forum Hong Kong, Dr Deborah Pretty said reputational crises have a fundamental impact on shareholders and businesses, with shareholder value dipping 5% over the year following such a crisis.
The wearable technology people now have the ability and access to instantly spread news which may or may not be accurate causing a growing headache for businesses globally. Reputational risks should be top of the agenda for listed companies, according to Dr Pretty.
“In times of crisis, senior management is exposed more than ever before. The shareholders have access to information they may not usually have access to which means the risk to share prices is paramount.”
Hallmarks of Winners and Losers
- Deep commitment to loss prevention and mitigation.
- Strong, visible leadership from CEO.
- Accurate and well-ordinated communication.
- Instant, global response and action.
- True remorse: commitment to meaningful change.
- Failure to prioritise risk preparedness.
- Weak or delegated leadership, failure to take responsibility.
- Opaque partial or inconsistent communication.
- Delayed, absent or limited action.
- Minimal, inauthentic, reluctant contrition (if at all).
Dr Pretty urged risk managers to ask the board what their firm’s reputation is worth, what drives its value and how the firm’s reputation is protected before and after a crisis.