Garry Honey in his book, A short guide to Reputation Risk states as follows: “The value of reputation is frequently under-estimated because it is rarely measured. In many global corporations it is the silent assets that only shows up in the gap between book value and market capitalization. A significant part of the Intellectual Capital of a firm, reputation has enormous value in attracting new customers, employees and investors. Often a hidden boost to marketing and advertising activity of an organization, nobody knows the true value of reputation in securing future revenue or maintaining market share.”
In most cases customer’s trust is boosted when the company they are trusting with has a good reputation and that is maintained through the transacting of any business. With the emergence of social media platforms, it has become increasingly important for organizations to maintain trust by how they interact with the world and respond to any form of concern that may arise in any public space. Reputation has a value even when it is not quantifiably measurable. If it has a value then any reduction in its value is a risk to the business and this risk has to be monitored and dealt with to avoid the risk. Reputation threat can also be turned into an opportunity. It all depends with how the risk is handled. There must be a proper strategy in place to deal with reputation risk in case there is any form of threat to the organization. This strategy should have in mind the customer touch points and how these are monitored and managed.
While managing reputation risk it is important to understand the primary stakeholders of your organization. In case that there is a stakeholder who is important in the continued existence of the organization, then you need to ensure that you manage their interaction with you on all spaces that they experience your presence as an organization. Primary stakeholders would ideally include customers, employees, investors and suppliers. One of these primary stakeholders is the customer, in fact there is an old adage that says customer is King! In a published report in the Business Daily in September 2022, it was reported that Zuku-owned Wananchi company had a market share of 27.9% of the fixed data market in Kenya.
This is a huge market share. The company has however experienced some turbulence in recent past due to downtime in their fiber connectivity. The customers, who are the primary stakeholders of the entity have not been receiving the services as they expect. They have taken to their social media platforms daily expressing their frustrations about the services. Zuku responses to the comments from customers, the only challenge is that the complaints are persistent indicating an operational risk in the organization. This has a great impact on reputation of an organization. The way business is conducted is through referral; people first listen to the experience of others prior to making a decision. Incase there is a negative experience this can have a downward spiral effect on the organization. Managing customer touch points is no longer a good to have but a must have in any organization. It is the first place a prospective customer will visit prior to making a decision to work with any organization.
Operational risks are the risks that disrupt daily business operations. They are inherent in the operational activities of the business. The different types of businesses have their own unique operational risks based on the respective sectors. Operational risks can either be people risks, process risks, system risks and external risks. It is therefore important to define the relationship between operational risks and the control environment. In the case of Zuku there event was the systems failure and that could be either be hardware or software failure or even both. The losses associated with such failure can be quite substantial for any business and or organization. It is therefore important to manage these operational risks that give rise to disruption of daily business operations. In the case of Zuku and from the comments on their social media platforms, some of their clients have moved their business to their competitors since they have not managed to take care of their operational risks. Operational risks are very predictable and the easiest to control as they arise from the actual conduct of business.
Garry Honey in his book, A short guide to Reputation Risk states as follows: “Reputation is something you are given by others, you do not choose it, others assign it to you so its quality is a reflection of how they see you. You can of course influence how others see you by your behavior, but a reputation is earned as a consequence of actions”. The actions of Zuku have earned them a certain reputation, which is part of what we now perceive them as. They can however rebuild their reputation based on what mitigating actions they put in place. Reputation risk is the difference between performance and expectation, in many places it is said that we need to manage expectations by delivering beyond the expectations. This is a good strategy as it earns some great reputation. Stakeholder identification and appreciation is an essential part of managing reputation risk in organizations. The reputation of any organization is a shared responsibility amongst all employees.
Caroline Gathii is has an International Diploma in Enterprise Risk Management and is the lead Risk & Governance Expert at FirstIdea Consulting Limited
Email: [email protected]
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