Deloitte study shows growing primacy of crisis risk for companies


Deloitte released a study late last week affirming why crisis preparation and risk management need to be major considerations for C-level executives in 2013.

Company reputation and the fallout from reputational damage are the No. 1 strategic risk for large companies, according to the survey. Overall, progress on strategic risk management is evident, though most executives admit that their programs do not support their business strategy well enough.

Ask House Speaker John Boehner about the self-imposed government shutdown fiasco. Republicans earned a favorability rating of only 24 percent in the latest Wall Street Journal/NBC poll, the worst in the poll’s history.

What’s trending here is that three years ago, reputational damage ranked only third among six key strategic risk concerns listed for a similar Deloitte study. The increased role of social media in corporate use and involvement explains the added levels of concern.

The rise of reputation risk as the key strategic risk is mirrored by executives listing social media, which has transformed reputation management as the biggest technology disruptor and threat to their business model. Nearly 50 percent listed this above other technologies such as analytics, mobile applications, and cyber-attacks.

“The rise of reputation as the prime strategic risk is a natural reaction to recent high-profile reputational crises, as well as the speed of digital and social media and the potential loss of control that accompanies it,” explained Henry Ristuccia, Deloitte global leader, governance, risk and compliance. “The time it takes for damaging news to spread is quicker, it goes to a wider audience more easily, and the record of it is stored digitally for longer. Even in an environment where economic conditions remain tough and technology threatens business models, this is why companies place reputation at the top of their strategic risk agenda.”

The inescapable conclusion here is that responsible executives must anticipate and train for events that can damage reputation — since reputation hits play out in lost sales and downward stock prices. With the vagaries of social media, these may not even be real events. They could be lies, rumors, problems created outside the company, or natural events that are all but unpredictable.

What is predictable and actionable, however, is the certainty that one or more of these events will strike your company in a given year. In fact, there is an 80 percent chance that in any five-year window there will be a month when a company loses 2o percent of its value, according to Oxford Metrica’s 2011 Reputation Review. The only way to handle it is to prepare your teams and responses in advance, so everyone knows what to do when the crisis pops.

Attention and investment in strategic risk management at senior management levels continues to grow according to the Deloitte report. More than 80 percent of companies say they explicitly manage strategic risk rather than just limiting their focus to traditional risk areas such as operational, financial, and compliance risk. However, there remains work to be done to tie strategic risk management to strategy, with only 13 percent of executives surveyed stating that their risk management program supports their business strategy “very well.”

The content of this blog is about crisis management and mismanagement in a digital age. It originates with Steve Bell, who spent 30 years as a journalist for the Associated Press and in four top editor positions at The Buffalo News. He is now Partner/Director of Public Affairs at Eric Mower + Associates, one of the nation’s largest independent advertising, integrated marketing and public relations agencies, with seven offices in the Northeast and Southeast. Learn more about EMA at http://www.mower.com. Steve’s blog is based on his own opinions and does not represent the views or positions of Eric Mower + Associates.

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About steveoncrisis

The content is about crisis management and mismanagement in a digital age. It comes from Steve Bell, who spent 30 years as a journalist for the Associated Press and as managing editor and editorial page editor at The Buffalo News. He is now Partner/Director of Public Affairs at Eric Mower and Associates, one of the nation's largest independent advertising, integrated marketing and public relations agency with six offices in the Northeast and Southeast.
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