On both sides of
the Atlantic, the twin concerns of Governance and Reputation
Risk have been pushed unceremoniously and uncomfortably
on to Boardroom tables. Tougher legislation and directives
from the Sarbanes-Oxley act in the US and, in the UK,
the Financial Services Authority, along with the Higgs’
Review on boardroom reforms are focusing Directors’
minds.
While here – as elsewhere – there is “deep
water” between the US and UK approaches, there
is unity on the goal of protecting the interests of
all stakeholders in companies, including investors,
the prime responsibility of a company’s board
of directors.
We have entered into the Age of Perceived Risk. Nothing
is now “risk-free” – least of all,
being a company director. A feature of this new age
is the loss of trust and credibility in institutions
– in both the corporate and public sectors.
Then add consumer angst and social power, the might
of the litigant, and legislative censure, and you have
a cauldron of risks and challenges that organisations
ignore at their peril.
With Boards traditionally accused of gathering like-minded,
non-confrontalists with little opportunity for real
scrutiny, companies can expect a tougher time retaining,
let alone recruiting, company directors who become increasingly
liable for collective mismanagement, poor decision making
and exposure to risk. As in law, ignorance is simply
not an acceptable excuse. The once closed if not decidedly
opaque “club” of yes-men (and it is still
mostly men) must transform itself into a forum for informed
debate and not unoccasional challenge. Beyond tarnished
personal reputations, the penalties for poor risk management
and oversight can range from unlimited fines to imprisonment.
Research comes into its own in the
age of perceived risk
It is of no surprise, therefore, that conscientious
and/or beleaguered company directors are turning to
research for a sense of the health of their world, the
measure of the responsibilities they must assume, and
the personal or professional risks to which they themselves
may be exposed.
Objective and independent research is increasingly being
used to test internal and external “stakeholder”
perceptions and expectations, and monitor the “weak
signals” or “murmurs” that may yet
either support them or destroy them in the years, or
maybe months, ahead.
As an organisation’s key audiences become more
wary, Directors must be prepared to deal honestly and
effectively with the complex web of risk controversies.
They need to develop their skills in negotiating with
activists whose perspectives and priorities may be radically
different from their own.
Welcome, then, to the world of risk assessment, the
world of measurement and the world of assessing and
balancing the expectations of a variety of increasingly
important stakeholders. Reputational risk research has
finally entered the Boardroom.
Company directors need to know:
• What is changing? And at what speed?
• What is expected of us?
• Is our employees’ behaviour a reflection
of our values?
• How does this affect where we want to go?
Directors need to keep themselves up-to-date –
objectively and quickly. Seeing things through the prism
of those who have most at stake may not be the best
path to encourage full disclosure. So independence is
key. So, too, is timeliness. By the time they see the
results of an extensive interviewbased study taking
several months or more, the world may have moved on.
There may be new issues and active stakeholder groups
to consider, ones that were not even on the horizon
when the study was started. The challenge is to identify
the new issues and their champions as they emerge, before
they have gathered momentum and become hard to influence.
And the directors need to “own” this flow
of intelligence – and not let others with perhaps
vested interests control its content or direction.
We find that it takes a combination of technology, insight,
imagination, and intensive analysis by consultants with
many years of content evaluation experience to capture
and illustrate the threats to and, importantly opportunities
for, Sandra Macleod reputational value. There is still
a long way to go in developing these methods, but already
we are seeing results that bring some of the emerging
issues out of the shadows into the visual range of Directors
and help to focus minds in the Boardroom. This kind
of research has not only proven useful in anticipatory
and preventative management, but also in encouraging
innovation and positive change.
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Priorities for management attention
and action
By integrating wider measures of corporate health and
success beyond the single and unreliable measure of
earnings alone, Boardroom debates and decision-making
can focus on priorities for action to help ensure a
solid tomorrow. In today’s business environment,
those company directors who are armed with reputational
risk research in place of brandy and cigars will be
able to contribute to their company’s long term
prosperity while protecting their own exposure to loss
of personal reputation or litigation.
Background
Echo Research Group, international specialists in reputation
analysis and communications research, provides intelligence
about perception and image, to help clients understand
the structure of their reputation and optimise their
strategic decisions. With 165 analysts, Echo has offices
in London, Brussels, Paris, Stockholm and New York.
Echo’s clients include a quarter of the FTSE and
Fortune 100, government departments and NGOs.
For more information:
Sandra Macleod
Tel: +44 (0) 1483 413 600
E-mail: sandram@echoresearch.com
Website: www.echoResearch.com
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