The importance of brand reputation is stronger than ever these days, and companies are recognizing the necessity for strategic risk management. A recent study conducted by Forbes Insights on behalf of Deloitte shows company reputation and the fallout from reputational damage as the number one strategic risk for large companies, surpassing business model and economic trend concerns.
The global survey of strategic risk management practices at more than 300 major companies around the world reveals a shift in focus from traditional areas of risk such as operational, financial and compliance risks, to strategic risk; that is, risks that affect or are created by an organization’s business plan and strategic objectives. Companies are not only making strategic risk a priority, they are changing how they manage it, with 94 percent of survey respondents indicating they have changed their approach to strategic risk management over the past three years. Two-thirds of surveyed companies say strategic risk management is a high-level priority and overseen by the CEO, board or risk committee.
What is the driving factor of these shifts of risk concerns? Social media.
Social media is at the forefront of every day life, and that includes the business world as well. It has transformed reputation management and the way we communicate. Social media enables instantaneous global communications.
“It used to be that if certain risks were to happen, a company could have up to a news cycle to respond,” says Phil Maxwell, Director of Enterprise Risk Management for The Coca-Cola Company. “The speed of risks is so much greater now, and as a result you have to be more prepared – faster to respond than you were in the past. That’s one of the biggest differences today versus even three or four years ago.”
Whether we like it or not, social media is all around us. It is no longer about deciding to engage on social media, it is how we do so. Social media is about leveraging your online presence, while exerting an extreme amount of reputation management. It takes only seconds to ruin a company’s reputation built over years of operation.
The Deloitte study also reveals that while 81 percent of companies say they explicitly manage strategic risk, only 13 percent state their risk management programs support their business strategy “very well.” With numerous case studies concerning reputation risks such as the BP oil spill, Congressman Anthony Weiner, the government shutdown and many more, hiring an executive to oversee strategic risk management and brand reputation is a necessity in today’s business world.
View the full Deloitte report, Exploring Strategic Risk.
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