Reputation resiliency drj 3.28.2012 final

Randall Till, Till Continuity Group Linda Locke, Reputare Consulting

Reputation Resiliency in a Volatile Environment

Spring World 2012 Disaster Recovery Journal March 28, 2012

What keeps your CEO up at night?

2 Reputare Consulting LLC | DRJ: Reputation Resiliency | March 2012

Reputation Resiliency: Key points to explore today


•  The world has changed

•  Reputation: measureable value, threats and penalties

•  Gaps in risk literacy

•  Enhanced models for ERM and BCM

•  To get there: integrate reputation

•  Value at all levels

Some risks don’t surface in traditional revenue filters

Scraps debit card fee after consumer backlash


Penn State abuse scandal chilling in details

FedEx vows to track down delivery man who tossed computer monitor over fence

Komen Foundation In Contortions

Over Justifying Planned Parenthood Decision

Why are companies surprised?


New world, new risks


Traditional risk mindset is no longer adequate - Limited, insufficient revenue filters -  Operational-only risk preparation and mitigation

Today’s environment requires resiliency: -  Strength, flexibility, swift recovery -  Comprehensive management of operational AND reputation risk -  Adaptability to a continuously changing environment

Resiliency: The ability to adapt to a continuously changing environment


•  A systematic process improvement for more comprehensive risk management

•  Two sides of resiliency:

  Prevent conditions of risk

  Manage consequences of event

•  Increases value to the organization Source – Carnegie Mellon Software Engineering Institute

Resilient organizations understand, measure and manage reputation


Daily reputation fluctuation

A resilient organization manages both operational AND reputation risk


Managing for Resiliency

• Ongoing measurement and monitoring

• Balancing the risk and cost tradeoffs

• Taking an enterprise focus

Operational Resiliency Ability to manage risks

and function/adapt throughout the lifecycle of

disruptions

Reputational Resiliency Ability to maintain good stakeholder perceptions and supportive behavior

at all times

Risk Assessment (RA) and Business Impact Analysis (BIA)

Business Continuity Disaster Recovery

(BC/DR) Operational Resiliency Model

Business Continuity IT Operations Security

Operational resiliency is “owned” by the company


But reputation is “owned” by stakeholders


•  Customers •  Suppliers •  Investors •  Advocacy groups •  Regulators •  Policymakers •  General public

Reputation = judgments and perceptions of others

Stakeholders’ perceptions develop via three channels


• Direct experience with the company • What others say about the company (online and off) • What the company says about itself (marketing, PR, etc.)

Photo: mack2happy

Positive reputation yields measurable value


- Strong brand loyalty - Returning high value customers - Lower employee turnover - Easier recruitment of high-caliber employees - Higher investor confidence - Positive regulatory environment - Lower costs of capital

A company highly regarded by its stakeholders is more likely to enjoy:

The risk: Negative reputation exacts a measurable penalty


-  Increased customer churn -  Elevated customer acquisition costs -  Higher employee training costs - Regulatory constraints -  Increased cost of capital -  Lower investor confidence -  Increased vulnerability to competitors

A company viewed with distrust and outrage by its stakeholders is more likely to suffer:

The trajectory of reputational crises

17 Reputare Consulting LLC / What We Can Learn from Seven Stranded Castaways © Reputare Consulting 2011

Corporate initiatives and messaging

Stakeholder experiences

Third party conversations

Reputation penalty or advantage?

Reputare Consulting LLC | DRJ: Reputation Resiliency | March 2012

BP Stock Price vs. DJIA: 2007-2012

18 Chart: Yahoo! Finance

Reputation penalty or advantage?

19 Reputare Consulting LLC | DRJ: Reputation Resiliency | March 2012 Chart: Yahoo! Finance

Apple Stock Price vs. DJIA: 2007-2012

Why reputation matters to business

v

20 Reputare Consulting LLC / What We Can Learn from Seven Stranded Castaways © Reputare Consulting 2011

Provided by Trust Across America

Based on five factors: Financial stability Accounting conservatism Corporate integrity Transparency Sustainability

The resiliency model for reputation


Data-driven insight

24 x 7 monitoring

Outside-in perspective

Willingness to engage, act

Enterprise-wide understanding

Balanced desire to protect revenue

AND reputation

Problem: Major gaps in reputation risk management for corporations


Reputation literacy not on risk agenda

Risk literacy not on reputation agenda

Current gaps provide pathway to value for the organization

•  Help lines of business understand competitive risks – and opportunities – to protect reputation.

•  Help shape strategy to address drivers of reputation.

•  Quantitatively measure the impact of communications response in a crisis – to improve next time

•  Escalate emerging risks to c-suite and board for shift in resources, strategy to mitigate risk

•  Elevate the role of risk organization


How do we manage reputation risk?


ERM: Integrate

reputation into risk agenda

BCM: Incorporate reputation

intelligence, mitigation into

practices

Integrating reputation resiliency into ERM


Deliverables: • Distinct reputation risk assessment • Set baseline measurement • Integrate reputation into reporting

Opportunity: • Define reputation resiliency for organization • Expand view of risk to include non-market, non-

operational issues with impact to reputation • Address broader issues of concern to Board

Business processes: ERM


Reputation resiliency for ERM

Develop mitigation strategies

Identify key risks; establish agenda

Monitor; report to c-suite

Build risk competency at strategic level

Outcome of ERM reputation process


Quantified reputation risk for the enterprise

Build culture of risk literacy

Define drivers of risk, priorities

Embed reputation intelligence into BCM governance


Risk Assessment (RA) and Business Impact Analysis (BIA)

Business Continuity Disaster Recovery

(BC/DR)

BCM Governance

Crisis/Emergency Management

(CM/EM)

Business Continuity/

Disaster Recovery (BC/DR)

Risk Assessment (RA)

Business Impact Analysis (BIA)

Transformed BCM program


BCM: Reputation Resiliency

RA/BIA: Incorporate quantitative analysis of reputation

impact

BC/DR: Integrate reputation impact analyses into BC planning

CM/EM: Enhance plans,

processes to include

reputation risk monitoring

Conduct exercises related to reputation risk scenarios

Integrating reputation into BCM


Risk Assessment •  Incorporate reputation risks •  Build reputation risk awareness for the business area

Business Impact Analysis (BIA) •  Enhance reputation impact analysis •  Provide meaningful reputation data

Current approach is only a guess at reputation impacts:

(1 = Critical, 5 = Low)

Current approach is only a guess at reputation impacts:



Business Recovery Planning •  Incorporate reputation risks •  Elevate reputation risks within business areas

Emergency/Crisis Plans •  Enhance crisis plans to include reputation measures

•  Monitor reputation risks dynamically

•  Expand EM/CM processes to address non-physical disaster events



BCM Exercises and Scenario Planning

•  Incorporate reputation management

•  Expand the scope of BCM exercises to address non-physical disaster events

•  Expand training and testing for PR/Comm teams

•  Form reputation team within crisis management organization

Summary: Value of Reputation Resiliency to BCM


Enhance risk management practices and become reputation champions

Provide more quantitative analysis and rigor to set corporate priorities

Elevate the value of BCM planning processes by addressing reputation risks

Move enterprise to a more secure, resilient state


The resiliency model for reputation

Data-driven insight

24 x 7 monitoring

Outside-in perspective

Willingness to engage, act

Enterprise-wide understanding

Balanced desire to protect revenue

AND reputation

The ultimate goal of resiliency


Strong revenue

AND reputation

Linda Locke +1 314 435 3428 Twitter: Reputationista

Thank you.

For a copy of our white paper, please contact: [email protected] [email protected]

Randall Till +1 314-608-7672

Reputation resiliency drj 3.28.2012 final

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