The Market Value of Reputation
Research by the World Economic Forum showed that on average, a quarter of a firm’s market value can be attributed to reputation.
This finding is borne out through recent findings at Deloitte. Deloitte’s 2014 global survey on reputation risk revealed that 41% of respondents who had been hit with a negative reputation events said that one of its biggest impacts was loss of revenue. Meanwhile 41% also cited loss of brand value as a big impact of a negative reputation event and 37% said that regulatory investigations followed in its wake.
Managing Reputation Risk
In other words, evidence bears out the suggestion that the corporate world is coming to recognise the value of reputation with increasing clarity. As such, businesses are turning to reputation risk management to negate the threat a negative reputation event poses to revenue margins and brand value.
Data from Deloitte suggests that 87% of company executives surveyed said that they believe that reputation risk is more important or a lot more important than any other strategic risk facing their firms. A further 88% said that they are specifically turning their attention to the task of managing reputation risk.
The Reputation Risk Management Blind Spot
Deloitte went on to show that the companies they surveyed are more than prepared to manage risks in areas they control directly. 69% of those questioned said that they are most prepared to manage risk when it concerns regulatory compliance. A further 68% said the same of employee misconduct, whilst 66% said that they are most prepared to manage risk when it concerned executive misconduct.
However Deloitte data went on to show that the businesses they polled are less prepared to manage risk when it concerns something beyond the scope of their direct control. Only 47% said they are prepared to deal with risk when it concerned a third party.
What Happens When a Third Party Goes Online?
For many businesses, third party equals dissatisfied customers. The arrival of digital technologies such as the internet, Google and social media have given these consumers a new voice. Many choose to use this voice to damage the online reputation of a company by posting negative content online.
This is the reputational risk many companies feel ill prepared to address. When a third party chooses to post negative content online, it has the potential to be picked up by the most widely used search engine in the world; Google. This allows the negative content to be seen by anybody who searches that company’s name, damaging their reputation in the eyes of a potential consumer.
“Issues Can Escalate Very Quickly.”
Suncorp Limited’s group chief risk officer Clayton Herbert explained how the toxic mix of a dissatisfied third party and modern technology can pose a risk to corporate reputation in more depth. According to Forbes, Clayton said:
“There’s been a recognition that with the increasing influence of social media and social media sites, as well as activist sites, issues can escalate very quickly. This can threaten your reputation more significantly than in the past. As a result there’s more sensitivity to reputation risk in the context of those types of social developments and technology developments over the last five years.”
What is Online Reputation Management?
As such, firms all over the world are turning to online reputation management to navigate these murky waters. Online reputation management focuses on replacing the bad with the good via content creation. Using Search Engine Optimisation (SEO) online assets such as social media profiles, blogs, PR releases etc. are created and laced with the search term in question.
Google likes relevant content. Creating online assets that are relevant to your search term will see said assets rise up the Google rankings. With regular optimised content this will see your assets rise to page one for your search term, negating the reputation risk of a negative reputation event spurred by a third party online.
The Rise of Online Crisis Reputation Management
This strategy has long been employed by digital agencies and PR firms as a way of handling crisis situations. Yet 2014 saw demand for online crisis management in the form of online reputation management services reach new levels.
According to PR Week, a new survey published recently by Econsultancy revealed that “there was a 16 per cent growth in demand for online reputation management services from PR agencies over the past 12 months” along with a significant number of requests for “content creation.”
Online Reputation Management in 2015
The increasing recognition of the value of reputation, the rising trend of turning corporate attention to managing reputation risk, the lack of confidence in managing the risk posed by third parties online and the growing demand for reputation management services equate to one thing. The corporate world is coming to rely on online reputation management to protect their company reputations online.
The continuation of the trends that have resulted in the reliance should result in one thing; online reputation management will go mainstream in 2015. As businesses around the world continue to face the reputation risk posed by third parties who have access to the internet, they will need to turn to online reputation management to protect their corporate reputations online.