Worldwide: Counting The True Cost Of Reputation And ESG Risk

Organizations are increasingly focused on protecting their brand's reputation, shifting from a PR issue to a financial concern. Our survey of 375 executives highlights growing awareness and preparedness, but reduced confidence in risk processes.

Overview

Reputation management was once an afterthought, primarily handled by crisis communication teams. However, this perception has shifted.

Issues tied to reputation, like environmental, social and governance (ESG) concerns, now play a central role in financial and business strategies, requiring a more proactive approach. The rise of social media, capable of spreading negative events rapidly, has intensified this shift, posing challenges for risk, finance, and communication departments.

In our recent Reputation Risk Readiness Survey in partnership with Polecat, we surveyed 375 senior executives from leading global companies. Results revealed a growing awareness of the potential costs of reputational damage, with organizations preparing for financial impacts.

While companies feel they have the right personnel to handle reputation risks, confidence in risk management systems and crisis management capabilities has decreased since our previous survey in late 2021.

Interestingly, social media has become the most vital means of communication, but C-suite engagement with these platforms has declined, possibly due to concerns about navigating an increasingly polarized political landscape.

About the survey

Our survey was carried out by our partner, Coleman Parkes Research, in June and July 2023, using a mixture of phone interviews and web-based survey forms.

We received 375 responses from senior decision makers across a range of industry sectors based in Europe, North America, Asia-Pacific and Latin America.

Key findings

1. Reputation priority: Reputation is now a top-three risk for 26% of companies and a top-five risk for 55%, marking a significant increase from 2021.
2. ESG influence: ESG issues have emerged as major reputation risks, with environmental, social, and governance concerns at the forefront.
3. Financial preparedness: 95% of companies have allocated budgets for managing reputational damage, and 87% understand the cost of transferring reputation risk from their balance sheets.
   

   95%

   of companies have allocated budgets for managing reputational damage.
   
   
4. Accountability decline: The percentage of companies linking formal governance processes to board-level KPIs has decreased from 23% in 2021 to 14%.
5. C-Suite caution: Engagement with stakeholders and customers on social media has notably decreased, reflecting executives' concerns in a polarized media landscape.

What you'll learn from this report

Reading this report will provide you with valuable insights into the dynamic world of reputation risk management and its evolving significance in the contemporary business landscape. Here's what you can expect to gain:

Understanding reputation as a financial asset: Learn how reputation has shifted from a public relations concern to a financial asset. Discover why businesses are increasingly treating reputation as a priority in their risk management strategies.

Key findings on reputation risk: Explore the key findings of our second Reputation Risk Readiness Survey, offering you a comprehensive overview of the current state of reputation risk management in organizations worldwide.

ESG-driven concerns: Gain insights into how environment, social, and governance (ESG) issues are intertwined with reputation risk and how businesses are aligning these concerns for effective risk management.

Financial preparedness: Understand how organizations are preparing for the financial impact of damaging reputational events. Learn about the budgets reserved for reputation risk management and the insights into transferring reputational risk from balance sheets.

Accountability and leadership: Delve into the accountability structures for reputation risk management and the changes in leadership engagement with stakeholders and customers, especially on social media.

Crisis management challenges and understanding: Learn about the challenges and improvements in crisis management capabilities, as well as the deepening understanding of the potential length and depth of a reputational crisis.

Communication and social media dynamics: Understand the complexities of communication in a polarized media environment and how this affects executive engagement with stakeholders and customers, especially on social media.

Financial impact and risk modelling: Explore how businesses are dealing with the financial implications of reputational crises, including the assessment of potential losses and the importance of strategic risk management.

The road ahead: an enterprise approach: Discover the evolving strategies businesses are adopting to address reputation risk and why a more mature phase of reputation risk management is on the horizon.

By reading this report, you will gain a comprehensive understanding of reputation risk management's changing landscape, emerging challenges, and the strategies organizations are employing to navigate this crucial aspect of modern business.

These insights will equip you with the knowledge needed to make informed decisions and enhance your organization's ability to protect and leverage its reputation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.