Did you know that there are 11 key risks that affect your company's ability to acquire, protect and retain capital?
It's about License to Operate
An evolving consumer, a shifting marketplace, a world in transition and new tools and channels in Social Media, provides a complex reputation landscape that a Company now operates in to protect its capital. To survive and be sustainable a Company must not only operate, they must also innovate. This requires a legal and regulatory license to operate (risk management) and a social license to grow and innovate (opportunity). Both of these licenses to operate are dependent on your stakeholder's level of trust, good feelings, admiration and esteem for your Company (RepTrak, 2004).
These business risks are broken down into 2 types of business risk :
Both have an impact on your company's ability to retain and recover stakeholder trust in the event of a crisis.
There are 3 fundamental strategic risks for your Company:
Each of these risks can have a significant impact on shareholders and investor trust if not effectively managed.
There are 8 common operational risks that all have an impact on the trust of dominant groups of stakeholders.
Why do these risks matter?
Fundamentally, we see 6 outcomes of issues in these areas:
The Investor Perspective
Today Pension Funds and their Asset managers are under pressure from their Customers to care about environmental, social and governance issues as well as the economic fundamentals. Investors are the recognized parties in risk mitigation and reputation risk management.
For an investor, fiduciary responsibility is a given. That’s their role as an Investor. Investors must demonstrate an adequate assessment of risk return relationship and identify opportunities. Investors deploy risk issues screening using an array of business intelligence data providers focused on listening to what stakeholders say about the company ("outside in") as well as examining what a company says about itself ("inside out"). Using fundamental and ESG analysis tools, they integrate both qualitative and quantitative intelligence in order to make informed decisions to price and protect their assets.
What is the likelihood of trust recovery if you have a crisis that stems from one of these risks? Will it be severely damaged, where full recovery is both questionable and costly and the risk demands the attention of the Board of Directors and priority action? OR is trust recoverable with little effort or cost and can be contained locally without the need to inform senior management?
Today the Principle of Responsible Investment (PRI)'s 1,395 signatories now have a total of $64 trillion in assets under management (McKinsey, Feb 2015) Investor. This is up from $4 trillion only 10 years ago on the PRI's launch. This shows both the demand from consumers and their stewards and the resulting practices of today's asset managers.
I appreciate that you are reading my post. On LinkedIN and our blog, I write about board related issues - corporate strategy, human capital, reputation risk, technology, corporate governance and risk management trends.
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If you are interested in using the RepTrak model to benchmark your reputation, or if you are interested in developing your reputation risk management, digital, communications or responsible investment strategies, do connect with us at RL Expert Group.
For more on this topic, check out my other recent LinkedIn Influencer posts on the Reputation Risk Management agenda:
About Leesa Soulodre:
Leesa Soulodre is Chief Reputation Risk Officer and Managing Partner of RL Expert Group - a reputation risk management advisory firm and the Asia Associate of the Reputation Institute.
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