Reputational risk: how to protect your business?
A company’s reputation entails risks, whether in the construction, development or maintenance of a company.
What is Reputational Risk?
Reputation is an estimate or representation of the public’s opinion of an entity. This entity may represent a natural or legal person, an enterprise, or all kinds of organizations. This reputation entails risks, whether in the construction, development or maintenance of this reputation.
Companies usually make considerable efforts to gain an advantageous reputation and sometimes devote entire departments to these purposes. These departments focus on the reputation and notoriety of the company, one of its most valuable assets to ensure its long-term development. Indeed, the better the reputation, the more the company arouses the interest and enthusiasm of the customers and they are more likely to trust it.
In addition to companies, all types of people are also looking for a good reputation. For example, an influential blogger, a personality, a craftsman all need to build a reputation that allows them to grow their business and attract more and more people to them. The more the public speaks highly of them, the more successful they will be.
If these different groups invest a lot of effort and resources to build a good reputation and notoriety, often without paying attention, they can also lose it in no time at all. Many risk factors can quickly ruin a reputation like these:
- Ethical Violation
- Poor management of corporate accounts
- Poor customer relations
- Poor internal employee relations
- Management of lax databases
- Gap between reality and expectations
- Outdated advertising methods
- Incorrect evaluations
- Ethical Violation
A breach of ethics is one of the most important risks to a person’s or company’s reputation. A lack of ethics or transparency can gradually erode a reputation or ruin it in an instant if it is a major issue.
Poor management of social networks
Social networks should always be supplied with content that is judicious and attractive to the targeted audience, and relationships with prospects should be courteous and show the entity’s interest in its customers.
Management of lax databases
With technological advances, many things have changed. Complex calculation methods are supported by software and client portfolios are now computerised, making it easier to manage a large portfolio and automating commercial actions. Nevertheless, these large databases present several risks to an organization’s reputation. Incorrect data management can lead to data errors or misunderstandings, whether due to human or computer errors, creating a risk for the company. Another danger is data leakage. Hackers can break into the company’s databases and steal a certain amount of financial or personal data, which is unfortunately quite common and causes heavy losses for the company and significantly damages its reputation.
Difference between expectations and reality
An organization that raises expectations too high may face a return to fortune if buyers expect to get more than what the product or service actually brings. As a result, disappointed consumers carry only a negative or neutral image, negatively impacting the organization’s reputation.
Outdated communication methods
People, environment and habits are constantly changing and the methods used to capture their attention must also change and adapt as they change. Many companies still use old communication methods to build a reputation. While some still work relatively well, most do not get any reaction or cause negative reactions. An organization that fails to adapt to its market and needs loses credibility and influence.
It is very important to regularly evaluate its notoriety and its presence in its target market, but if this assessment is not close enough to reality, it can generate risks. In particular, companies need a precise and honest evaluation of their reputation to identify the risks and defects to be corrected in order to keep a satisfied clientele and, if possible, exceed their expectations. If building a reputation takes a considerable amount of time, it can be reduced to nothing in an instant without adequate measures.
Poor customer relations
Some organizations, once their name is well established, forget to treat their clients as their most valuable asset. Degraded relations with their customers put the organization on the brink of collapse and it is extremely important to quickly restore the situation. Without customer satisfaction, as much for the quality of products or services as for the relational aspect, the company’s growth prospects are compromised and very often, these companies gradually lose their image and let their turnover decline.
Poor internal employee relations
Poor employee relations can be a major risk to an organization’s reputation. They are the ones who generally serve customers and must convey a positive image of the company. A poor relationship with employees will give them a bad image of the organization and impact their ability to serve customers as they should, potentially frustrating customers. Similarly, if problems arise during customer service, employees should provide feedback to resolve them. This may be difficult if relations are bad internally and without real cooperation. Problems and sources of conflict that are not identified and dealt with quickly, in turn, can lead to loss of client trust and greatly damage the organization’s reputation.
There are many risks to the reputation and notoriety of organizations of all types, and it is essential to identify them and take steps to continually monitor and strengthen this image.