Preserving Reputation in a Poly-crisis World

Spoiler alert: The Answer is Within Your Own Company

The Sage of Omaha Warren Buffett once aptly commented, “Trust is like the air we breathe. When it’s present, nobody really notices; when it’s absent, everybody notices.”

In this issue of Confidence Matters, we explore the role of trust in preserving one of our most valuable assets: reputation.

Against the backdrop of a poly-crisis world and AI-fueled misinformation, organizations are finding it harder than ever to anticipate and respond to reputational threats. However, with growing mistrust of traditional institutions, businesses are in a unique position to look within to find their greatest ally in preserving reputation.

Enter the heroes of our story; culture and communications.

Creating a strong culture that invites open dialogue when discourse becomes polarized requires a great deal of trust, but when trust is there it enables us to face those reputational risks waiting just outside our door with confidence.

The importance of mitigating reputational risk

The threat to a company’s financial strength from reputational damage is very real. A 2020 study suggests that intangible assets (including brand and reputation) represent up to 90% of the market value of S&P 500 companies.*

If reputational risk is now effectively equal to financial risk, reputation management is increasingly important to a company’s financial stability.

However, because reputation is not a risk in and of itself, but an outcome of other risks, most organizations lack the metrics to effectively monitor the financial impact of a reputation event.

As a result, it can be challenging to include reputation as a distinct category within an enterprise risk management (ERM) framework.

A new era of crisis management

The global pandemic highlighted some of the key crisis management "gaps" many companies faced including a lack of clear roles and responsibilities and poor preparedness. It also prompted a major shift in how organizations view crisis management.

The typical crisis management approach of relying on the CEO to defend a company's reputation via traditional media is no longer cutting through.

According to the 2024 Edelman Trust Barometer, trust in traditional media is on the decline, exacerbated by false or incorrect narratives spread through social media and supercharged by generative AI.

The business sector is now the most trusted of the institutions ranked.

Culture, communication and the ‘bank of goodwill’

The fact that employees are more likely to trust their co-workers and their CEO over the media and government sends a clear message:

It has never been more important to have a strong culture if you want to build trust within an organization and mitigate reputation risk.

Higher-trust businesses place more emphasis on improving overall communications, starting within the organization and this focus makes them better equipped to take a hit to their reputation without sustaining lasting damage.

Firms that can build up a "bank of goodwill," both internally and externally, can draw on this resource in times of need. In practice, this means using communication channels that enable direct engagement and fuel culture.

This insight is backed by findings from Gallagher’s Internal Communications’ State of the Sector report: When asked about the purpose of communications within organizations, internal communicators rank "culture and belonging’ as most important.

Mitigating reputational risk (or, the answer lies within) 

This refocus on internal communications and culture helps explain why reputation risk management strategies are shifting from an "outside-in" to an "inside-out" approach externally and from "top-down" to "bottom-up" discussions internally.

Akin to putting up a smoke detector to mitigate fire, this approach to reputation risk management enables organizations to respond quickly before a blaze gets out of control.

What does this mean in practice?

• Internal communication becomes more of a two-way dialogue between staff and senior management; and
• Responsibility for delivering authentic messaging about the company shifts within the organization.

With these strategies in practice employees who feel a part of the organization are more likely to share positive experiences in their own voices, giving the organization a competitive, authentic edge in reputation management.

Making the framework work

Whether or not your organization has begun to look inward for reputational reinforcements, or if they explicitly factor reputational risk into an ERM framework, it remains important to establish a functional, structured approach to managing reputation that includes perspectives across a range of multidisciplinary stakeholders.

Lisanne Sison, Managing Director, Enterprise Risk Management for Gallagher observes:

“If you have already established relationships with key people, they know what needs to be escalated, and they have your network of partners in place, your business will be much more nimble in protecting against reputation damage. That muscle memory and connective tissue is really what's going to help the organization respond effectively.”

Key Takeaways

• In the current poly-crisis environment, amid growing mistrust of institutions like media and government, businesses are finding it harder to anticipate reputational threats, making effective crisis management more challenging.
• A record number of elections during 2024 likely added to political tensions and drive greater generation of ”fake news”.
• With a significant proportion of a company’s financial worth now represented by intangible assets, reputational risk is now effectively equal to financial risk and reputation management is increasingly important to financial stability.
• The business sector has an opportunity to build on a position of trust to bolster company reputations and protect the bottom line.
• The typical crisis management approach of relying on the CEO to defend a company’s reputation via traditional media is no longer as effective. Firms must pivot towards an approach that is bottom-up, with a growing emphasis on the importance of internal communications.

*"Intangible Asset Market Value Study," Ocean Tomo, 2020

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