1. | WHAT’s At Risk|
Reputational Risk:
Are You Protected
By Patricia Kagerer
G
rowing up in El Paso, Texas, I often referred every bystander is a videographer — and every video can be
to the social aspect of the city as a fish bowl. posted to the Internet in seconds. The voice and opinions of
Everyone knew everyone. Even though any community member can reach potentially millions of
El Paso has more than 800,000 residents, people with a simple tweet or a Facebook post. The evening
the business community always felt like a news has taken a back seat to what is communicated via social
much smaller town. My mother always told me to “never networking channels.
burn a bridge.” Mom’s advice served me well throughout
the years by protecting my personal reputation as well as A public obsession with news combined with advanced tech-
my professional one. nology has created a big risk for corporations, both large and
small. The public is not fond of cheaters, supporters of sweat-
Corporations have a similar risk when it comes to protecting shops, safety violators or environment polluters. At the same
maintaining and developing their own unique brand image. time, the public simply cannot get enough of a good story.
Just a decade ago, when a catastrophic or public interest event
occurred, corporations had to worry about what would be on Learn from Others
the evening news and in the newspaper. Now, however, the In the last couple of years, we have witnessed the demise of
stakes are much higher. Through the advances of technology, companies and individuals due to missteps in communica-
56 | LitigationManagement | summer 2012

2. tion and poor public perception on how they have respond- could come from events such as supply chain failure in prod-
ed and handled difficult events. Take a look at BP, Toyota, ucts or services, safety violations or injuries, environmental
Goldman Sachs and Tiger Woods. All were instantaneously concerns or employee dishonesty just to name a few.
judged — fairly or unfairly — on their actions and respons-
es (or lack of) to the scandal affecting them. Taking a quick Step 2: Implement — Utilizing the image protection team
glance at these examples, we are reminded that it takes years to review the risk analysis and corrective measures taken to
to build up brand recognition and reputation and just a split proactively create a working image protection plan is key. The
second to destroy it. goal is create an accurate document that is measured in qual-
ity not quantity. For years the philosophy was that the more
Most risk management professionals complete comprehen- pages a crisis management plan contained, the more prepared
sive assessments to determine the risk exposure to a company. a company would be. The reality is that a clear, concise, well-
We focus on third-party liability risk, property, auto, human defined plan that is communicated and practiced well in
capital, etc. Yet how corporations handle and respond to any advance of any crisis is essential. Periodic review, actual drills
event that is made public has the potential to make or break a and training are critical to enhance the quality and value of
company. According to Brandt D. Beal, CEO of the Gibraltar the plan in the future.
Group, “Reputation is a company’s greatest asset and has the
potential to be a company’s greatest liability. Often middle Step 3: Establish Cultural Awareness — The entire
market and national accounts do not have a specific brand organization must be aware of the importance of image pro-
management component in place.” As a result, Gibraltar part- tection to the organization. All employees can provide an
nered with Blake D. Lewis of Lewis Public Relations to ensure early warning for the potential issues or crises that can derail
that reputational risk is incorporated and addressed as part of a company. Employees can either enhance or detract for the
an overall comprehensive risk assessment. reputation management initiatives. Culture does not happen
overnight. It requires a clear definition of core values and a
Beal explains, “Many risk managers are cerebral. They think dol- commitment to walking the talk. This leads to an overall com-
lars and cents, tangible assets and liabilities. They plan for their mitment from everyone in the organization to do the next
exit strategy and crisis management after a loss. They know their right thing.
crisis management procedures like the back of their hand. Yet the
exit strategy for what to do to (protect the image of a company Risk Transfer Options
after a reputational risk event) is difficult to quantify.” Prevention and planning for potential reputational risk expo-
sure is of paramount importance in this day and age. Also
In the past, silence was often considered the best option. In addressing the loss exposure when things do occur through
today’s social media-crazed world, silence may be the ruin risk transfer techniques is important as well. Beal recom-
of a company. Risk managers must create a plan for how to mends discussing reputational risk transfer options at length
get out in front of a bad rumor and how to tell and control with your insurance broker. “There are many ways to manage
their story. Lewis recommends that companies establish an this exposure in the insurance market today. Some are cost-
image protection team comprised of leaders in several key effective. For example, adding a reputational risk endorsement
disciplines who can address the who, what, when, where, why to the first layer umbrella coverage can provide coverage for
and how of navigating away from potential reputation risk managing the reputational exposure that is often overlooked.”
and addressing head on any identified real or potential image It is important to determine the potential exposure that can
issue. He recommends that the team have expertise related to be catastrophic and make an educated business decision as to
operational, facilities, community, financial and legal knowl- how your organization wants to handle the exposure.
edge. Just as in any safety and risk management plan senior
leadership must buy in and be accountable for creating, con- Seventy percent of companies that have reputational catas-
necting and supporting the program. trophe are not in business two years later. Have a plan. Share
it with key team members. And most, importantly, don’t
Step by Step create it, stick it in a binder and then never look at it again.
There are three key steps to being handling reputational risks. Make sure you review it regularly. Every time there is a
national crisis, pull out your own plan. Go through it, using
Step 1: Assess and Prepare — Similar to a risk and the crisis currently being played out to determine if any-
safety assessment, the assessment and preparation for repu- thing needs to be re-evaluated. Learn from the experiences
tational risk must address intangible costs related to potential of others. Having a plan that is a living document will ensure
risk exposure. Reputation management is largely based on that it is always relevant, which will help you not become
the ability to anticipate the types of incidents the organization part of the 70 percent. LM
may sustain that would call their ethics and values in ques-
tion. It begins with identifying what events could cause harm Patricia Kagerer is the Vice President of Risk and Safety Management for
to customers, employees, suppliers or neighbors. The harm CF Jordan Construction, a Texas-based construction company.
summer 2012 | LitigationManagement | 57