How Businesses Can Manage Risks To Their Reputation


Large firms are more visible to the general public, and as a result, they are more susceptible to negative publicity than small enterprises. Large corporations are also more likely to have the financial resources to rehabilitate a tarnished brand than small businesses. Unfortunately, small businesses may not be able to withstand a negative news story, especially in today’s world where social media makes it so easy to distribute false and destructive information. As a result, it is vital to identify potential reputational hazards to your firm before they manifest themselves in reality. A list of some of the most prevalent difficulties, as well as what you can do to secure your small business, is explored below. 


What do we mean by reputational risk?


The danger that negative news would damage a company’s public image and affect its capacity to generate money is referred to as reputational risk.


The reputation of a corporation is arbitrary and is based on how the public perceives it. Consumers, employees, investors, and regulators can all be influenced by their perceptions of a company, which may or may not be accurate in the first place. While a poor perception of a firm may discourage individuals from associating with it, a positive reputation can assist a small business in obtaining new clients, obtaining finance, and obtaining competent workers. It helps to build relationships with members of the community, vendors, suppliers, consultants, and other professionals.


A good reputation takes a long time to create and requires significant effort to maintain, and it can be easily sullied if not handled properly. Many organizations are connected to consumers, suppliers, and other stakeholders over the Internet, which makes them susceptible to threats to their reputation. With a few keystrokes on a computer keyboard, they can quickly have their reputations tarnished.


What sort of things can damage a company’s reputation?


A data breach: This can have a negative impact on your company’s reputation, but one that involves sensitive information such as social security numbers or birth dates may have a greater impact because data thieves may sell it on the black market. Phishing emails sent to employees are a leading cause of data breaches because they provide a direct channel of communication between the sender and the recipient’s company’s computer systems.


Issues with employees: Finding out that your employees have broken the law is a terrible experience in and of itself. However, if this information becomes public, it might have a negative impact on your company’s reputation. It also can be damaging if an employee publicizes a bad experience working for the company – just look at how Echelon9 NPS scores for McKinsey rate it as “Toxic”. 


Product recalls and defects: You want your products and services to be of the highest quality possible. In contrast, if you are forced to recall a product or receive negative press as a result of your poor work, you must not only correct the mistake and deal with any potential legal issues, but you must also repair the harm done to your reputation.


Social media posts: Customers posting bad or false reviews on social media sites or an employee writing something embarrassing about your firm on a site such as Facebook, are examples of unfavorable social media posts.


Accidents at work: Accidents at work can be particularly harmful if they result in Occupational Safety and Health Administration (OSHA) penalties or other evidence of safety violations.


Taking steps to protect your reputation


Often, business owners do not give much thought to their company’s reputation until after it has already been harmed by negative press. This is a grave error. Preventing a detrimental occurrence from occurring is the most effective method of protecting your company’s reputation. Here are a few pointers:


Identify potentially harmful events: You do not need to identify every hazard; instead, you should focus on the ones that are most likely to occur. You can use the list provided above as a guide.


Determine the following responses to consumer issues: If you receive a negative review, you can take a number of actions, including ignoring the post, asking satisfied consumers to leave positive reviews, and offering to make good on any perceived wrongs. If the reviewer has made misleading comments, you should respond with the facts as soon as possible.


Create a clear social media policy: Create permissions for who can view and submit information on your organization’s social media profiles, and define the overall message you want to portray when communicating about your company. Your social media policy should also include guidelines for how employees should conduct themselves online.