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
- Reputation risk
- Competitor’s offerings
- Social media
- New e-business Models
Here we are going to discuss about the most important risk to a brand “The Reputation risk”
“It takes 20 years to build a reputation and five minutes to ruin it, if you think about that you will do things differently”
Reputation can be summed up as the ideas, beliefs, expectations, and opinions that are held (in general) about something or someone. Brand is part of reputation, and a well developed brand can help protect reputation in times of crisis and business interruptions.
Brand is built by companies through mass media. Damage caused from a reputational or branding, failure can result in multifaceted ,and long-lasting consequences
Any action, event or circumstance that could adversely (or beneficially) impact an organization’s reputation
So what are the difficulties in managing reputation:
a. Lack of control
Companies cannot directly control the messages received by third parties.
b. Limited credibility
When 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 than that of the experts.
c. Overwhelming complexity
Customers usually do not understand the complexity underlying certain business decisions.
What one need to manage reputational challenges
a. A functioning 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.
b. Measurement: What gets measured gets managed
c. 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
I. Define a clear vision and values backed up by policies and procedures that guide behaviors and decision-making throughout the business and its supply chain.
ii. Tell your stakeholders what you stand for, what your goals are and how you plan to achieve them- so they know what to expect.
iii. Ensure the reality matches the vision- and can withstand scrutiny- so expectations are met.
I. Stay ‘in tune’ with your stakeholders through dialogue and engagement.
ii. Systematically track their evolving perceptions and expectations so strategy is recalibrated, gaps are minimized, emerging issues are potted early and opportunities are exploited.
Barriers to successful reputation risk management
I. Poor awareness of the true value of reputation as a key intangible asset
ii. Lack of understanding of sources of reputational risk
iii. Understanding the impact of risks to reputation due focus on short-term impacts –leading to wrong risk priorities
For more information on how to turn risk into rewards, talk to SKGY’s Risk Advisory team.