[MUSIC] I'm Lynne McChristian, I'm a senior instructor, and I'm also the director of the Office of Risk Management and Insurance Research. And so I teach insurance and risk management courses to undergrads and to graduate students. But I also run the research program, and we give faculty fellowships to study effective ways to manage risk. [MUSIC] Well, everything happens so quickly now, and it's not just social media. So when we think about digitalized marketing, sometimes people just think it's social media, but it really is everything. It's the automation piece, it's cybersecurity, it's innovation, it's governance. So it's all these pieces that are part of that brand strategy. And some people may say that enterprise risk management is about the finance piece, the operational piece. But what's happening is many corporations see reputation as everything. If you talk to CEOs, some of them say, what is it that keeps you awake at night? It's the threat to that reputation. That is the overarching thing. So some companies are saying reputation is so important that that's the top of the ladder for our risk to manage, and yet, they don't do it purposefully. It's less formal than all the things that companies do to manage operational, finance, safety, all those other types of risks that are part of that enterprise risk framework. [MUSIC] The first thing is that I think sometimes people don't have a real good understanding of what their reputation is. There's the perception and then there's the reality, and there's a gap between that. So what is the reality of a corporation's reputation? They probably need to do more than just take a guess, okay? You don't just count your social media. There's a lot of other things that they have to do to honestly take a look at what is our reputation risk. And one of the things they can do is analyze the media coverage that they get, there's tools to do that, but also look at their stakeholders and talk to all those different stakeholders to see what that reputation truly is. It might not be as solid as what they think it is. I think one of the important things for companies to know too is that that reputation didn't have that formal structure before, and it requires it. Just like you have a formal finance risk protocol, you have a formal procedure and protocol for managing your regulatory issues, you need that for reputation, too. [MUSIC] Well, you're not looking just at brand and image. You're looking at that corporate governance piece. That's part of that reputation risk. And we hear you say walk the talk, but in the area now where everything is more transparent, there is a need to think about the actions you take in that reputation risk umbrella. So for example, if you do something outward facing, something public, but you do something inside internally that contradicts that, that can hurt your reputation. And what's interesting about it is I always say that bad news gets out all by itself, good news, you have to work at. So one of the things about reputation to actively manage it is to have that formal program, but also make sure that somebody owns it. Reputation management is not accidental. It's gotta be purposeful. It's got to be proactive. And understanding where your vulnerability is and to make sure that what you do is aligned with what you say is really important to manage that risk. Because people are going to remember when you stumble. [MUSIC] Well, a couple of things that happen. It's when something happens, how you respond is really important. And we don't have to respond to every little thing. If you have a strategic reputation risk plan, then you know what you want to respond to and how. So like some negative perceptions, how do we deal with the negative perceptions? An example might be is, company does great things with its corporate social responsibility, so they're doing things to protect the environment, and that's something they make a big deal about. They let everybody know about it. But internally, they may have some wasteful practices that they think nobody knows about because they're inside. So another example might be a company may say that they have to restructure, financially restructure. And they will look for bankruptcy protection or look for different mechanisms, and then they pay their executives a bonus. That's going to damage your reputation. And those things are difficult to recover from because we remember the negative. Another example could be if you ask people which are the most reliable vehicles, they'll say, well, foreign-made cars are more reliable than American-made cars. That's not true, okay? So it used to be that Japanese-made cars were more reliable. But in the last decade or longer, the American manufacturers have upped their game, but that perception still exists that they're not as reliable as the other cars. So some of those things stick, and by constantly, purposefully getting that good news out, that's a way to help manage that reputation and the expectations. And I should point out, too is that your stakeholders' expectations change. So you may think that you had it all great and right two years ago, and that's yesterday's news. [MUSIC] We build, as corporations and entities, we build reputations over the course of decades, and they can fade away and crumble with one incident, okay? So if you have a good reputation, you have loyal customers who will defend you if there's a small misstep. But if we take a look at all the typical business risks and brought together a team with diverse perspectives and diverse skills. This is what's a beautiful thing about bringing in people who aren't all accountants, who aren't all data folks, but they have their perspective. That's what's beautiful about a risk management process, is it's not left to one type of skill. You bring that all together and they can see things differently. If you looked at all the different risks and looked at them from the business angle, but then looked at it from the reputation risk, you will have that discussion about where the gaps might be and where the vulnerabilities might be. We're seeing more people and more companies who are vulnerable because of that third party risk. We have all those partnerships, they do a good job in their own business, but they're not paying attention to what's being done with one of their partners. And if there's a misstep there, both of them go down. So that's one thing to look at. I think it's also important to understand that scenario planning is a good tool in the communication space to try to say what could happen. Let's play this out and see what could happen if this incident occurred in our company, and to use that to kind of give you a game plan about how you would react and respond. [MUSIC] That's a great question. Here's something to think about. If you ask employees who is responsible for reputation, they would say, well, we are. If you ask C suite executives who is responsible for reputation risk, they'll say, well, the CEO is. But you know what? That's an informal way to do it. Reputation risk should have someone who owns it. And if someone owns it, if somebody is put in charge of it, then you'll have that process. And what's missing is the informality. Now you will have organizations and marketing communication will have a crisis management plan. Most organizations have a crisis management plan. If a natural disaster happens, if a product safety, if there's an injury, we have a protocol for that. But crisis management is the opposite of risk management, okay? And so if you're only dealing with what could go wrong, you're missing the piece to direct what can go right, and how to build up that equity that will hold you through if there's something that does happen. And again, the companies who have managed their reputation well had a quick response and maybe they did more than what was necessary. But they could point to the fact that at the end of the day, if you can say, did we do all that we could do? And if you can answer that, then you've protected that reputation, the brand, and the image. [MUSIC] I think that that is becoming more complicated. Managing that reputational risk is becoming more complicated because we're more aware, the bad news gets out there within a split second. I think that it's very difficult to segregate them if they can build a link. So if you've done business with somebody, this cancel culture, if a company has done business with somebody or an entity that wants to be canceled, how do they react to that? So it's no place to hide, and it's something that has to be understood and managed so people are more careful. I think one of the things we have to think about is if the world is continually being more transparent, then that makes us more aware of what that reputation risk is. And we put that in front of everything we do, and the positive is that will help build stronger ethics and integrity. [MUSIC] I think one tip would be to use your experts, okay? So if you're going to be proactive, reputation risk is not a passive thing, it's gotta be proactive. So what you look for is, who are our best spokespeople? Not necessarily the people who work in public relations and communications, but who are our best spokespeople throughout the organization that we can get out in front of the different stakeholders and share that story from their learned perspective and to be visible? So that visibility, if you can build a corporation where the visibility is shared from multiple people and you use that expert knowledge, then that is a way to spread that reputation and to give access. That's what people want. So it's not just talking to media, it's making sure that if there is important forums, that you have participation from your experts, and you have that visibility that will help build that brand and image. [MUSIC]
