Opinion: Reputation and risk – how the two worlds work together

Headland recently launched a new reputation risk proposition. Simon Burton, partner at Headland, will lead the new proposition with Hans-Kristian Bryn, a former partner for strategic risk at professional services firm Deloitte. They explain how collaboration leads to an effective risk strategy.

Over a third of corporate value is down to brand and reputation, and 87% of executives say reputation is their most important strategic risk.

Yet despite its importance, in many corporates it is not clear who has responsibility for managing reputational risk.

On the one hand, corporate affairs directors (CADs) are responsible for managing corporate reputation. They have expertise in managing stakeholder relations that give rise to reputational risk, and which are vital to mitigating it.

On the other hand, CFOs, finance directors and chief risk officers (CROs) have the best understanding of the commercial and financial impact of a reputational issue. They are also involved in the disclosure of principal risks to investors and stakeholders.

Combining the different skill sets of these two functions is the best way to deliver effective reputation risk management, but achieving genuine collaboration rarely comes naturally in practice, precisely because of the different skills and cultures present in the two disciplines.

That is not to say that the corporate affairs and risk functions don’t already interact. They do. The question is whether they genuinely collaborate to both protect and enhance company value in an area which, by their own admission, is business critical?

Too often reputational issues are addressed only in the breach, rather than being factored into decision-making at the outset. Nowhere is the challenge more pressing than around big investment decisions like launching new products, changing sourcing strategies or initiating M&A activity.

The good news is that the expertise will, to a greater or lesser extent, already exist in most companies. The issue is that the required skills and capabilities are typically spread across different functional silos. To be effective in evaluating and quantifying reputational risks, firms need to be able to capitalise on the capabilities of both the corporate affairs and risk teams. Collaboration between these functions should be part of business as usual.

In many companies, such a day-to-day partnership approach does not come easily. However, the case for updating the existing approach towards reputational risk management is strong.

Corporate affairs and risk functions working in tandem can deliver an enhanced ‘service’ and a new source of competitive advantage for companies. A singular and aligned approach will put both functions more directly at the heart of the decision-making and strategic planning processes, and in closer interaction with the core of the business. That’s the opportunity ahead.

• Headland Consultancy and H-K Bryn offer reputational risk analysis and conduct collaborative workshops to facilitate effective working between corporate affairs and risk functions. The new approach brings together reputation management expertise with analysing and modelling the commercial impact of reputation risk.
• To find out more, please contact Simon Burton ([email protected]) or H-K Bryn ([email protected])