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Corporate Reputation and Risks: The Repercussions of Mismanagement

reputation2In a recent post, we outlined some of the basics about reputational risk and the very real threat it poses to organisations in today’s world. (You can read the post here.)

In the words of a report by the Economist Intelligence Unit a few years ago, “…although a shortage of cash can bring a company to its knees, it is more frequently a loss of reputation that deals the final blow”.

The impact of reputational damage can be costly indeed, and the financial toll is often exacerbated by the fact that transactions in global financial markets are now instantaneous. Apart from the direct financial implications, the loss of key personnel and skills is another fallout of reputational loss.

Since reputation is primarily a function of stakeholder perception, a strategic and well-rehearsed communications plan is critical to protect a company’s image and repair reputational damage. A company that focuses only on risk avoidance and does not account for unexpected crises can sustain serious reputational loss when disaster strikes.

Take the case of Research in Motion (RIM). The tech giant best known for its BlackBerry phones and instant messaging services took a major hit in 2011 due to a major global service outage that lasted for days. By itself, the crisis was bad enough; what made things far worse was the failure of the company to communicate with the public in a timely manner.

Furious customers were vocal about their displeasure, calling for the two CEOs to respond to the situation. There were widespread discussions on social media networks like Facebook and Twitter, with many declaring their intentions to switch to different phones. Newspapers around the world ran stories on RIM’s mismanagement of the crisis. A sample headline from the UK’s Daily Telegraph: “BlackBerry’s master class in how not to do PR”. It took days for RIM’s top management to apologise to their customers and address concerns; by that time, the damage was done.

The company’s share value dropped by an alarming 75% over the course of the year. The company has increasingly been losing customers to competition ever since, and experts say it will take great effort for RIM to regain its former glory.

Stay tuned for our next post in the Corporate Reputation and Risk series, in which we will talk about some of the key elements of a reputational risk management programme, such as the role of a CEO.

To see specific case examples and learn how we can help your organisation manage reputational risk, please contact the Baird’s CMC team.

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Filed Under: News, ShopTalk Tagged With: Baird's CMC, communications consultancy, communications management, corporate reputation, Paul Dillon

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