Reputational Risk
How to Manage for Value Creation

By Arif Zaman
Prentice Hall / Pearson Education
November 2003
ISBN: 0-273-66155-8
308 Pages, Illustrated
$247.50 paper original


"Our assets are our people, capital and reputation. If any of these are ever diminished, the last is the most difficult to restore." From Goldman Sachs' Business Principle.

Two years after the publication of the Turnbull Report on corporate governance in the UK, it has been acknowledged that "many companies now find reputation risk a central cause of concern". And recently, several large, high profile and established companies have found that if they lose the trust of a particular group of stakeholders, the costs can be very high.

They have seen first-hand that brand equity is a function of these relationships and how it can impact on access to capital, long-term profitability, cash flow and sustained shareholder value. As this book went to press, British Airways experienced a rare bout of wildcat industrial action that left its reputation reeling. In many ways, this incident captured much of the essence of what can happen when relationships sour with customers, employees and also with shareholders.

Today, the new "rules of the game" concerning corporate reputation are taking shape. These go well beyond corporate image or identity and are in a very different league to public relations. Corporate governance and company law reforms now demand that the duties of directors and company reporting requirements explicitly deal with the imperatives of reputation.

Reputational Risk - -How to Manage for Value Creation focuses on the relationships that underpin reputational risk management and points the way on how to effectively manage reputational risk. The Briefing demonstrates that the best way for a business to report on reputational risk management is to report on the strength of its stakeholder relationships and the benefits that these can bring.

It discusses why reputational risk must be aligned with an organization's strategic priorities and integrated into its approaches to risk and business management - demonstrating how investing in and maintaining reputation as a critical corporate asset can both build brand equity and help to deliver shareholder value.

Essential reading for all senior decision-makers who are responsible for business strategy and value creation, this Briefing demonstrates - in a language they can understand and through examples to which they can relate - how value creation will increasingly depend upon a proper understanding of what reputational risk really means.

Contents

1. Why reputation management is not enough
What you must know before you start
Why should I be reading this?
Turnbull: a key report, often misunderstood
Reputation management or reputational risk?
What drives what stakeholders expect of corporate brands?
Executive summary

2. Reputation
What you must know before you start
Growth of intangibles
Corporate reputation
Reputation, trust and business relationships
Reputational agents
Executive summary

3. Risk
What you must know before you start
Understanding uncertainty and defining risk
Up-side as well as downside
Human/behavioral dimensions of risk
Reputational risk
Executive summary

4. Reputational risk and customers
What you must know before you start
Why the customer is central to understanding and managing reputational risk
The service company difference - what it means for all companies
Why customer satisfaction alone does not safeguard reputation
Critical drivers of customer expectations and brand equity
The connection between brand values and corporate values - and why it matters
How channel conflict can sour corporate reputation
How does customer relationship mismanagement impact reputation?
How the Internet often increases reputational risk
Privacy: the key issue
Focusing on the user experience
Executive summary

5. Reputational risk and employees
What you must know before you start
How employee expectations and commitment are changing
Employee communications and the relationships they support
Commitment, performance and value
Internal and external reputation and the risk of corporate amnesia
Talent management and leadership development
Employee branding
Executive summary

6. Reputational risk and shareholders
What you must know before you start
Are markets really that efficient?
Investor relationships
Market sentiment and expectations
Corporate governance after Enron
Role of the non-executive director from 2003
Shareholder activism - and life after GSK's 2003 AGM
Responsible shareholding and long-term fiduciary duty
The emergence of pension funds
The rise and rise of socially responsible investment (SRI)
Executive summary

7. Globalization, international relationships and responsibilities
What you must know before you start
Globalization and political risk - what has changed?
Alliances, joint ventures and strategic relationships
Corporate social responsibility or corporate responsibility?
CSR risks
Managing CSR risk
Risk and sustainable development
Corporate governance and global governance
Executive summary

8. Differential advantage, value creation and reputational risk


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