42 | The Lion King
Why organisations
should care about
reputational risk
By Naomi Bazuaye
R
onald J. Alsop, author of The 18
Immutable Laws of Corporate
Reputation, defines reputation
as a gauge of our past results and
stakeholder confidence in our ability to
deliver in the future. It is the opinion that
others have of our organization and a
testament to our trustworthiness.
Reputation is what gives credibility,
depth and confidence in what we do.
Some research has shown that firms
with strong positive reputation attract
better people. They are perceived
as providing more value, which often
allows them to charge a premium.
Corporate reputation
A company’s reputation is perhaps its
most valuable asset. Therefore a risk
to its reputation is a threat to its per-
ceived value. Reputational risk is the
current and prospective impact on
earnings and enterprise value arising
from negative stakeholder opinion. To
one author “it is the loss of the value of
a brand or the ability of an organization
to persuade.”
A recent joint survey by Deloitte and
Forbes Insights of 300 top executives of
leading corporations shows that repu-
tation is considered the highest impact
risk area to business strategy.
How can companies man-
age Reputational Risk?
A company’s reputation can easily
be impaired by both true and false
allegations. Reputational risk can be
managed through prompt damage
control measures. In other instances,
this kind of risk can be more insidious
and last for years. Some corporations try
to understand what the potential risks
are to the company’s reputation and
prepare crisis management responses
or solutions.
However, many organizations tend to
take a rear-view mirror approach to risk,
especially reputational risk. For exam-
ple, where an organization’s image
has been damaged, they may get
