Brand Risk Management

S.HSpring 2014

Value

Investments

Risk

Brand risk can be defined as threats to the brand equity or

threats to the brand differentiators that make

consumers choose one product or service over the other.

Brands are subject to numerous risks.• competitors’

offerings• social media • new e-business

models

The most important risk!

Reputational Risk

Brand & Reputation

Reputation can be summed up as the ideas, beliefs, expectations, and opinions that are held (in general) about something or someone.

“Your Brand is the personality and

soul of an organization

communicated in various ways”

Maria Ross

Brand is part of reputation, and a well-developed brand can help protect reputation in times of crisis and business interruptions.

Reputation – image or reality?

“Image is reality. It is the result of your actions.If the image is false and our performance is good, it’s our fault for being bad communicators. If the image is true and reflects our bad performance, it’s our fault for being bad managers.Unless we know our image we can neither communicate nor mange”David Bernstein

• Brand is built by companies through mass media.

• Damage caused from a reputational or branding failure can result in multifaceted and long-lasting consequences.

The Reputation Equation

Reputation = Experience - Expectations

Reputational Risk Definition

Any action, event or circumstance that could adversely (or beneficially) impact an

organization’s reputation =

Reputational Risk (Impact)

Difficulties in managing reputation

Lack of control

Limited credibility

Overwhelming complexity

Lack of control

Companies cannot directly control the messages received by third parties.

Limited credibilityWhen third parties play a role in shaping a company’s reputation, companies need to

realize that in many cases their own credibility is much lower that that of the experts.

Overwhelming complexityCustomers usually do not understand the

complexity underlying certain business decisions.

To successfully manage reputational challenges :

A functioning early warning system.

Ongoing measurement of the reputation of the company, its markets and products

Rapid situational assessment by issue, product, and market.

Early Warning System

This may range from informal monitoring of various media sources over proactive stakeholder outreach to the development of an internal issue anticipation group. of particular promise is the use of information technology in this area.

Measurement

What gets measured gets managed

Situational Assessment

Once critical issues have been identified and their impact measured, managing such issues requires rapid and reliable situational assessment.

A dual approach to manage reputational risk

As reputation is based on perception, not necessarily reality, risks to both reality and

perception must be actively managed.

Inside- Out

Outside- In

Inside- OutDefine a clear vision and values backed up

by policies and procedures that guide behaviors and decision-making throughout the business and its supply chain.

Tell your stakeholders what you stand for, what your goals are and how you plan to achieve them- so they know what to expect.

Ensure the reality matches the vision- and can withstand scrutiny- so expectations are met.

Outside- InStay ‘in tune’ with your stakeholders

through dialogue and engagement.Systematically track their evolving

perceptions and expectations so strategy is recalibrated, gaps are minimized, emerging issues are spotted early and opportunities are exploited.

Barriers to successful reputation risk management

Poor awareness of the true value of reputation as a key intangible asset

Lack of understanding of sources of reputational risk

Understanding the impact of risks to reputation due focus on short-term impacts – leading to wrong risk priorities

Make reputation risk management everybody’s business

• Much of reputation risk management is as much about crisis prevention as it is about management after a crisis.

• Preparing and planning for the unexpected is not a simple action nor is it without cost.

• But the process can have significant positive returns for the organizations that invest in building their brand and making their reputations more resilient.