Recent events have shown that any company, no matter how big or sophisticated, can find itself in the eye of a reputational storm.
Often, the damage is preventable, arising from foreseeable risks or stories that slowly gain traction until they blow up into a crisis.
For example, a global brand lost significant sales and market value after a partnership with a celebrity fell apart due to the celebrity’s offensive comments – though their behavior had been known for some time.
In another case, a brand with a conservative customer base launched a marketing campaign centred around an LGBTQ theme, sparking a backlash and impacting the company’s revenue and share price.
In both instances, the worst reputational and financial damage might have been prevented with a better understanding of the risks involved from the outset, and earlier action to deal with the issue once it emerged.
So how can you learn from such cases to protect your brand and balance sheet in 2024? By monitoring public sentiment and integrating reputation risk management into decision making, with strong sign off and escalation procedures, you can reduce your risks, and address issues before they escalate.
Despite these very high-profile cases, which resulted in combined revenue losses greater than $1 billion, lessons aren’t being learnt. Companies are making the same mistakes, which are being amplified across social media.
We’ve seen one example already this year in which a fast fashion brand was exposed as having mislabelled products, having previously come under fire for employing workers below the minimum wage.
The risk of reputational damage is increasing, with more social media channels for stories to take root in.
Traditional media can also have a big impact. For example, in the UK, a backlash against the postal service for historic abuses was sparked by a TV drama aired in January. Stories can bubble under for months and even years without making an impact and then suddenly shoot up the news agenda, causing embarrassment and loss of public confidence.
Large brands may assume they have all the checks and balances to prevent such events. But the last year has demonstrated that, without constant vigilance and proactive risk management applied consistently, any company can find their reputation and their balance sheets at serious risk.
Make sure that you have good processes for signing off all marketing campaigns, partnerships, associations and corporate initiatives. Don’t just leave it to the marketing team. Include documented procedures for escalating any issues up the chain of command early.
Include reputation on your risk register and carry out regular reputational risk assessments. Make it a senior management responsibility, as part of your business continuity planning and horizon scanning.
Many reputational issues can be avoided by understanding where threats may be coming from. It’s important to listen to what’s being said about your brand across the media and socials to get ahead of any brewing story before it hits the headlines.
Not taking action early enough when a story emerges can leave space for negative comment to spiral. Review your crisis communications and response plans to make sure you can intervene within hours and minutes, not days or weeks.
Once reputational damage happens, it can go on for months or years and be hard to repair. Make sure you have contingency in place to deal with the financial consequences over a prolonged period. Consider how you would rebuild your brand and what resources you need for that.
WTW has partnered with some of the global leaders in this field to develop a holistic solution that can help prevent a reputational crisis happening and help you recover if an incident does occur.
Prevention: WTW has partnered with Polecat to develop a risk monitoring tool powered by artificial intelligence (AI) that allows you to track live sentiment and get ahead of any brewing story before it hits the headlines. Algorithms synthesize data from online and social media channels into dashboards and risk alerts for relevant media.
Risk quantification: Our Reputational Risk Quantification Model gives you an evidence-based value for the potential reputational damage likely to follow incidents most relevant to your business. This is based on statistical analysis, events data and our experience of reputational risk. The model can also help you map any gaps in mitigation and design a targeted program of reputational risk protection.
Reputational risk benchmarking: our Reputational Risk Benchmarking Portal provides a picture of your company’s resilience against reputation risk. By completing a simple questionnaire, you’ll get a report detailing your reputation risk maturity score, benchmarking your approach against some of the world’s leading companies, and providing best practice recommendations on how to improve.
Risk transfer: our reputational risk insurance solutions offer up to $50 million cover for loss of gross profit as a result of a significant adverse publicity event. Perils covered include damage by association with an affiliated business. Immediate interim payments are available to get through the crisis with support spread over up to 12 months to help you stay afloat in the aftermath.
Response: WTW offers access to experienced crisis communications experts who have managed crisis situations of all types around the world, from advice on media handling and strategy to leadership statements and speeches.
Rehabilitation: our experts will work with you over the longer term to develop campaigns and communications to help you turn the tide of public opinion back in your favor.
To find out more about our Reputational Crisis Insurance and Risk Management Solution, please get in touch.
