Guest post: Damage to reputation is #1 risk to business

Those of you who have been paying attention might remember a guest post last year from Crispian Cuss of Pittacus - a company specialising in advising companies about threats to their reputations. In their words:

> Pittacus has a simple proposition: to help organisations understand their reputation threats.

Well he's back, with another guest post. It is all about the top threats to business and is based on a survey from the end of last year.


##Damage to reputation is #1 risk to business

In their 2007 annual risk management survey Aon, the Chicago based risk management and insurance experts, revealed ‘Damage to Reputation’ as being the number one risk perceived by business.

The survey asked senior management and risk managers from 320 organisations, all with revenues of over $1 billion, across 29 different countries, a variety of questions relating to risk and its implications. In a change from recent years, where operational and financial risk headed up the table, the latest results reflect a greater awareness of the changing and increasingly diverse world companies are operating in. This was reinforced with other issues such as sustainability and pandemics also moving up the table.

While reputation is often viewed as an intangible asset, its importance is clearly understood with it coming top in all three regions surveyed (Americas, Europe and Asia/Pacific). Its value was spelled out by Aon: ‘a good reputation strengthens market position, reduces the price of capital, increases corporate value, insulates the brand, enables organisations to charge higher prices, helps to attract top talent, protects organisations from unwelcome takeover bids, arms them for merger and acquisition forays of their own and raises the potential returns from share offerings’.

Despite the value of reputation being clearly understood, along with it being viewed as a major source of competitive advantage, it remains a poorly protected asset. The survey also revealed that only 48 per cent of companies were prepared to meet a threat to their reputation. Furthermore, when it came to identifying major risks facing their organisation, 42 per cent relied on senior management intuition and experience. Only seven per cent used board workshops or scenario planning, and only eight per cent used external consultants.

The top ten Risks were:

1. Damage to reputation 2. Business interruption 3. Third party liability 4. Distribution or supply chain failure 5. Market environment 6. Regulatory changes 7. Failure to attract or retain staff 8. Market risk (financial) 9. Physical damage 10. Merger/acquisition/restructuring

> Thanks again to Crispian for contributing. Let's hope some of these large organisations turn to Pittacus to understand the threats better and Distilled to help with online reputation monitoring in 2008.

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About the author
Will Critchlow

Will Critchlow

Will founded Distilled with Duncan in 2005. Since then, he has consulted with some of the world’s largest organisations and most famous websites, spoken at most major industry events and regularly appeared in local and national press. For the...   read more