The Urgency of Effectively Managing Reputational Risk

10-21-19

Reputational risk is now the number one concern according to a survey reported by Bruna Martinuzzi in a 2018 American Express blog. We see almost daily in the media, how easily a company’s reputation can be ruined—this is a growing danger we face.

Fortunately, there are many ways to protect our reputations, but we need to develop a solid approach to management of that risk. Reputation is “the emotional bond between a company and its stakeholders,” according to Melanie LoBue in her blog at reputationinstitute.com. Reputational risk can threaten the life and longevity of our organization, increase risks to the likelihood of negative events and public opinion, and impact income, as well as public image.

Just as we have smoke detectors to detect a potential fire, we need a similar detector for reputational risk, suggests Carrie Minnich in her blog from the CPA Center of Excellence. At the speed of sound or a simple click, an organization’s reputation can be devastated. For non-profits, the impact on reputation may be even more devastating. As Minnich points out, a hit to a reputation can result in loss of volunteers, lack of referrals, decrease in the win rate of proposals, and create difficulty in hiring and attracting top quality board and staff. She suggests as a starting point periodically “googling your organization to see what others are saying.” It is imperative that we are aware of what the public sees so that we can aggressively correct inaccuracies and mis-information. We also need to monitor third party websites such as GuideStar, the National Center for Charitable Statistics, and the Better Business Bureau to verify that their information about us is accurate and thorough. It is helpful to create forums for board members, staff, consumers and our community partners to tell us what they are hearing about our organization.

Possibly most important, we need to develop a culture and organizational values that drive how employees comport themselves: a culture where staff at all levels of the organization hold one another accountable for ethical behavior, creating an environment of “see something, say something.”

We must own our reputation and actively pursue strategies to communicate who we are to the broader stakeholder community. This requires development of a communication and social media strategy that is smart, conveys our message, and is consistently pushed out over a long period of time. And, we have to live up to this message.

According to Nonprofit Accounting Basics, a growing number of organizations are appointing individuals or creating executive-level committees to lead risk management endeavors. At The Fedcap Group we have not centralized this function, but have actively communicated the importance of risk management –including reputational risk—being the job of every employee. It is a topic of significant importance to executives across The Fedcap Group and discussed during every Corporate Week. We also have an agency-wide Brown Bag Lunch on this topic that I lead annually. It is a major component of our Leadership Academy and our Executive Institute. It permeates the conversations of our organization.

This threat is real. A 2016 investigation by The Washington Post found that over a four-year period, more than 1,000 major US nonprofits disclosed in federal filings that they had suffered a “significant diversion” of assets from internal wrongdoing.”

As Warren Buffet once said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that you’ll do things differently.”

I welcome your thoughts.

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