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KEEPING YOUR GOOD NAME AND THE COST OF LOSING IT

By RL Expert Leesa Soulodre

In an age when trust and corporate ethics are so valued, the reputation of companies, their brands and their Executives, needs to be managed with great care. The price of losing your reputation is uncomfortably high. Each year, millions of pounds are spent promoting a company and its brands to create the perfect image. Yet a single negative comment can escalate and destroy a reputation or access to market capital within days. As a result, reputation management is fast becoming more than just a buzzword among business professionals.
A board level priority
Corporate reputation is now a board level priority, affecting an organization’s ability to source local partners, attract and retain staff, retain and increase revenues, deliver services and to compete in today’s global marketplace. Companies depend on public acceptance of their corporate actions and therefore position themselves in accordance not only with legislative standards, but also in line with public perceptions, ethical standards and etiquette.
An effective early warning system can alert executives to reputational risks quickly, and engaging with stakeholders means resources can be directed to deal with such threats.
Many firms, especially transnational corporations, find it increasingly difficult to manage
and handle conflicts with external interest groups. In addition to their established
stakeholders, they now face a complex web of “stake seekers” who also claim to have
a stake in the company’s decision-making and aim to put new issues on the corporate
agenda. Companies today seek to build relationships with such groups to anticipate
and prevent issues that could have an impact on their reputation. This process is
typically managed through Corporate Social Responsibility (CSR), where critics are
invited to join dialogues and round tables regarding controversial issues.
The role of the Communications Department
The Communications team lies at the heart of reputation management. When a crisis
hits, it is the in-house communications and PR specialists that take the lead in formulating
the communications strategy. Consultation and dialogue with stakeholders is increasingly becoming part of mainstream business practice and is no longer simply an optional means to “touch base” with interest groups. Rather, stakeholder engagement is now viewed as critical to business strategy; it represents a way of gathering important feedback, anticipating and managing conflicts, improving decision-making, building consensus amongst diverse views,
strengthening relationships and enhancing corporate reputation.
The Issues Lifecycle
When an issue becomes public, the cost to manage it increases and the opportunity
to influence the agenda is reduced. As we move into the political and regulatory environment,
the issue becomes even harder to manage and influence. (Figure 1)
THE ISSUE LIFECYCLE - RL EXPERT GROUP : REPUTATION RISKS MANAGED.
New Challenges and Principles
The increased volatility of issues in today’s business climate can really challenge Chief
Executive Officers. The risks run from poorer press coverage to potentially catastrophic
crises and reputational failure. Today’s business leaders need to enhance both operational
and strategic performance, maintain control over costs and at the same time manage
advocacy of key stakeholders across multiple geographies and time zones.
We know that reputation is not what the company thinks about itself, but rather the attitudes and opinions that others have formed, even if not grounded in fact. Stakeholders get their information partly from advertising, annual reports, events and corporate websites. These are elements that the company can largely control. But what about information made public by
journalists, investors, community newsletters, think tanks, customer and employee personal blogs and political activists? How does one ensure that people have accurate information from which to form opinions and how can an issue be prevented from turning into a crisis?

Energy organizations today need to ensure they have a dialogue with the relevant audiences,
with the right information and at the right time. Executive engagement programs and communications teams work best when they are connected with the relevant agencies,
departments and programs.
The New Tool of Trade – Trust
Development of advantage-creating resources such as employee motivation, customer
loyalty, influence on sector regulation and local license to operate are often dependent
on stakeholder instrumental strategies aimed at developing trust. This stakeholder battlefield is where license to operate can be won or lost. (See Figure 2)
THE BATTLEGROUND FOR STAKEHOLDER ADVOCACY - RL EXPERT GROUP: REPUTATION RISKS MANAGED.
Building an actionable stakeholder strategy where corporate reputation and behavior are aligned is now a critical factor for sustaining license to operate. The choice between ignorance and building trustworthiness as a core capability may well become vital for competitive advantage in a world looking for institutions it can count on for the long term.
Research by the public relations company, Edelman, found that if you go into a crisis as a distrusted company, it takes only 1-2 negative stories for a person to believe negative news. However if you go in as a trusted company, it takes only 1-2 positive stories for a person to believe positive news. Therefore, trust today can now be considered a protective agent and a facilitator of action leading to tangible benefits for a corporation.
The Future
It is clear that trust has to be earned through a company’s actions, and reinforced by
transparency and engagement. Corporations today have the opportunity to build an enduring foundation of trust if its leaders commit to a strategy that brings value to both investors and society. However, today they must further explain how profits are made and deliver a new level of transparency on business practices. Public engagement can be the driver for this change, which combines reassessment of corporate policy and continuous communication.

This will in itself create better understanding of stakeholder sentiment, which is critical
to capitalizing on opportunities and protecting the organization against reputational
risks. Hence, corporations must build relationships across the entire stakeholder
landscape by engaging them in a two-way dialogue, and always listening before
communicating.
This article written by RL EXPERT Leesa Soulodre was published in the March 2012 Energy issue of RepRisk Insight, an ESG Risk publication co-founded by RL Expert and its partner RepRisk AG, designed for the financial markets and their investee multinational corporations.
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