Recognizing How A Crisis Could Cause Reputation Damage

A good reputation is everything to a company’s business. While executives often recognize this to be accurate, they don’t always put forth efforts to prevent reputation damage. This is not only a shame but a detriment to the company because a positive reputation gives value to a brand.

Managers must understand that there is a direct link between a good reputation and the bottom line. When there is reputation damage, it can destroy everything.

Understanding reputation

A brand promise is a value or experience a company’s customers can expect to receive every single time they interact with that organization. How that promise is perceived by its stakeholders is its reputation.

Reputation risk is the gap between how an organization wants to be seen and how its stakeholders actually perceive it. When a reputation risk turns into a crisis, it can result not only in bad media coverage but also can affect the bottom line. In such instances, the risk should be understood as much more than reputation damage. It is really about risking lost revenue, shareholder value, and possibly the business.

Managing risk

C-suite personnel is accustomed to looking at risk, both financial and reputational risk. All organizations have the opportunity and can take steps to manage risk and prevent crises that all too often hit companies most unexpectedly.

It is important to understand that risks can impact any type of organization. Good business leaders know those first and foremost companies must deliver on their brand promise. In doing so, it builds and protects its reputation.

Additionally, the integrity of a company is becoming an increasingly important element of reputation. IT and security issues have not only been increasing but also will create much bigger reputational problems in the future.

Risk managers identify reputational damage from a sensitive data breach as the top risk facing organizations. No industry is immune from data breaches and companies that are compromised pay a high price that goes beyond the immediate technical fix.

When an incident does occur, the way it is handled has every influence on whether the risk develops into a reputation-damaging crisis. Companies may experience an accident or misconduct that doesn’t initially damage reputation. Yet, in today’s age of 24-hour media coverage and social media, news travels much faster than ever before. That seemingly innocent accident can become reputation damaging if the incident was not communicated well or it is later discovered it was due to intentional action.

When it comes to reputation, it is all about perception. What becomes important about these types of situations is that the impact on reputation can be mitigated when it is immediately and properly addressed.