The number one issue that keeps senior leaders up at night

A reputation takes decades to build but seconds to destroy. In these times, when modern communication enables a slip-up with one customer in one location to be shared with the world within minutes, reputation is increasingly a top priority for business leaders.

A recent survey by BSI found that reputation is seen as the number one most important factor in long-term success and organizational resilience. Why is it so important? And how well are businesses managing reputational risk?

Organizational resilience: a concept with traction

Long-term success in business involves looking further than the financial results of the next business cycle. To become a truly sustainable business, organizational resilience, 'the ability of an organization to anticipate, prepare for, respond and adapt to incremental change and sudden disruptions in order to survive and prosper', is required.

To achieve this level of resilience, businesses need to be prepared to take a holistic view of management, to be able to formulate strategy for decades to come while remaining flexible and to be lean enough to adapt to fast-changing situations. A resilient organization has the competence and capability across all parts of the company to take measured risks with confidence.

In 2017 BSI co-authored a report, Organizational Resilience, with the Cranfield School of Management to summarize the academic evidence, business insights and new thinking in this field. This followed the earlier publication of the standard BS 65000:2014 Guidance on organizational resilience, which provides best practice guidance on organizational resilience.

The report and standard caught the imagination of executives keen to ensure that their organizations were as efficient and as flexible as possible. To build on this, BSI has created an index benchmarking survey so organizations can measure their performance against sector and global norms.

Organizational Resilience Index Report 2017

The first index report on organizational resilience brings together the perceptions of more than 1,250 business leaders across the globe to give a view on 48 aspects of resilience, covering 16 core elements within the four categories of leadership, people, process and product.

Reputational risk was ranked the most important element overall, followed by financial aspects, leadership, vision and purpose, and information and knowledge management. However, when business leaders were asked to rank their organization’s performance, the picture was strikingly different: reputational risk was ranked ninth. The top five elements were financial aspects, alignment, leadership, vision and purpose, and governance and accountability.

Interestingly, reputational risk appeared to have global relevance, being ranked as the top issue for leaders in Australia, China, India, the UK and Ireland, and the US. Only Japanese executives said that other issues – business continuity and financial aspects – were more important. Despite underlining this importance, reputational risk barely featured in the top five elements where executives thought they were performing best. It made only the top five for Australia, where it was fifth in performance ranking.

Taking a sector-by-sector approach also underlined the importance of reputational risk. In the built environment, finance, food, healthcare, professional services and telecoms/IT sectors it was the top issue in terms of importance, and it was in the top five for the aerospace, automotive and energy sectors. None of the sectors ranked reputational risk as a top five element for performance.

Why reputation matters

High-profile reputational catastrophes such as the TalkTalk hack of 2013 will have done much to sear the risks of bad publicity into the minds of executives. With growing sophistication, cybercriminals are able to pierce a company’s defences and steal sensitive customer data or payment details. In turn, these can be used for fraud or phishing attacks.

Alternatively, the scenario could be similar to the exposure of the 2 Sisters Food Group, whereby food safety breaches were caught on camera by an undercover reporter. Although good governance should do much to prevent this kind of embarrassing incident, no company is completely immune from a data leak, a hack or other negative publicity that will damage the corporate image. Even when remedial action is taken promptly, negative perceptions of a brand can endure.

The best way to prevent and prepare for a reputational event is to have accurate data and effective systems and processes. This means your organization can minimize risk and respond proactively when issues arise.

Why not try benchmarking the resilience of your organization? Go to www.bsigroup.com/organizational-resilience for more