Reputation Risk

… a core concept used in Implementation and Delivery and Atlas107

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Concept description

Andrew Graham (reference below, e-book on right) defines reputation risk as “the risk that an activity, action or stance performed or taken by an organization or its officials will impair its image in the community and/or the long-term trust placed in the organization by its stakeholders, resulting in the loss of business, credibility and/or legal action.” (p. 119)

Graham writes:

“Three things determine the extent to which an organization is exposed to reputational risk. These are:

  • Is the organization’s reputation an inflated and unreal representation of its real capacity?
  • Are there changes in external expectations and beliefs about the organizations and its products?
  • Are there changes within the organization that will change its reputation?

“Effectively managing reputational risk begins with recognizing that reputation is a matter of perception. A organization’s overall reputation is a function of its reputation among its various stakeholders, overseers, clients, media and the public. A strong positive reputation among stakeholders across multiple categories will result in a strong positive reputation overall. However, it can also be expected that an organization’s reputation may well vary across this range. This is always a challenge as most organizations prefer to listen to positive news than negative. Further, weighing the relative significance of having a solid reputation, for example, with overseers and creditors but not necessarily with the media is a judgement call and a situation that can not always be fully balanced.

“One of the challenges for organizations is to recognize that they do not own their reputations. It is distinct from the actual character or behavior of the organization, as sound as that may be. When the reputation of an organization is more positive than its underlying reality, this gap poses a substantial risk. Eventually, the failure of a organization to live up to its billing will be revealed, and its reputation will decline until it more closely matches the reality. Worse still, there will be a sharper decline in overall reputation, with accompanying risks, as a result of this discontinuity. Life is not fair, especially in this area.” (p. 119)

Atlas topic, subject, and course

Managing Risk (core topic) in Implementation and Delivery and Atlas107.

Sources

Andrew Graham (2008), Integrated Risk Management Implementation Guide, free e-book at http://www.andrewbgraham.ca/integrated-risk-management-implementation-an-e-book.html, accessed 21 September 2017.

Page created by: Ian Clark, last modified 21 September 2017.

Image: Andrew Graham (2008), Integrated Risk Management Implementation Guide, free e-book at http://www.andrewbgraham.ca/integrated-risk-management-implementation-an-e-book.html, accessed 21 September 2017.