Reputational risk is not a single event that occurs at a specific point in time. It is a complex sequence of events that originate from a specific cause. Typically, the process develops according to the following scenario:
Occurrence : A company takes an action that violates social or business norms, such as refusing to serve a customer without explanation.
Emotional reaction . The loss of reputation begins the moment the injured party feels offended. For example, an offended customer posts a negative review on his blog to express his indignation.
Life Cycle of Reputational Risk
Source: shutterstock.com
Spreading negativity. A single customer usa student data package grievance does not greatly affect the company's reputation. However, if negative reviews begin to spread and there are other victims, this leads to serious problems.
Public reaction . The negative impact begins to affect people unrelated to the specific incident. This could include regular customers who have learned about the problem, or potential new consumers. One typical public reaction is a boycott – a refusal to consume the brand’s products or services.
Company reaction. After a massive negative reaction occurs, the brand often realizes the problem. At this stage, the company's reaction is key: it can deny the problem, try to hide the error, or take steps to correct it.
There is a widespread belief among the masses that there is no institution of reputation in Russia. Tina Kandelaki's advertising agency "Apostol" is a striking example of the opposite. The agency used the design for the New Moscow manhole covers from a foreign photo stock without permission. The agency estimated the cost of such a project at several million rubles. As a result of the incident, the advertising agency suffered from a loss of reputation and closed within a year.
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Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
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Reasons for reputational risks
Let us list the factors that carry reputational risks.
Management and staff of the company
A negative reputation of a CEO or other senior manager can affect the entire company, leading to loss of revenue, customers, and interested investors. The reputation of a company and its management are closely linked:
45% of the audience associate the image of top managers and management with the brand.
25% of a company's value is tied to its reputation.
Even if the CEO resigns, it is not easy to resolve the problem immediately in the event of a conflict. Decisive steps are required from the company: public apologies, compensation for damages. Even with the right actions on the part of the organization, it may take a long time to normalize the situation.
Management and staff of the company
Source: shutterstock.com
Not only managers can create reputational risks for a brand, but also other employees. Social networks of employees of large companies are under close attention of the audience. Even a single incorrect statement can become a source of problems.
Various work situations can also provoke scandals. For example, during the pandemic, refusing to serve customers without a mask often caused discontent. A photo of an employee without personal protective equipment posted on social media also led to condemnation and