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8/14/2019 Incorporating Reputation Risk Into Your Business Continuity Program
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Incorporating
ReputationRisk into Your
BusinessContinuity
ProgramSamuel Shmikler Resilient & Tested
8/14/2019 Incorporating Reputation Risk Into Your Business Continuity Program
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Why I care about this & why
ou should as well• Reputation risk management is one of thefastest growing risk categories
• The severity and recovery of reputation isdifferent than other “traditional” BC topics
• Few organizations have plans -- and still fewer
measure and practice
• I have personally been involved in major incidents -- and I’ve seen what works and what
doesn’t
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Topics
•8 Critical Questions
•2 Different Responsesto Reputation Damage
•18 Laws of ReputationRisk Response andRecovery
•Where To AddReputation Risk To Your BC Program
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8 Critical Questions1. How do companies lose reputation?2. What triggers reputation loss?
3. Were there distress signals?
4. Why are so many companies struggling with tarnishedreputations?
5. Who is ultimately responsible for losing reputation?
6. What does it take to restore a damaged reputation?
7. What can a company do to safeguard its reputation from loss?
8. Can a company build an enduring and lasting reputation in this
day and age?
8/14/2019 Incorporating Reputation Risk Into Your Business Continuity Program
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The Impact of Reputation
Risk
8/14/2019 Incorporating Reputation Risk Into Your Business Continuity Program
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Countrywide Financial
• Long before there was a liquidityproblem, there was a reputation riskproblem -- that was not properlyaddressed...
•What was the trigger?•What happened next?
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It began with a Instant
Message...Sent by former Wall Street analyst Paul
Berliner
• The IM was picked up and within 1day published in the business press
• The next day Countrywide’s stockdropped 22%
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What Paul IM’ed
“The chatter is that [Countrywide] might
file for bankruptcy."
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Countrywide’s Response?
Denied as "absolutely false"
In a statement, the bank said it "hassufficient liquidity available to meet itsprojected operating and growth needsand has accumulated significantcontingent liquidity in response toevolving market conditions."
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What happened next?
•Hired a PR firm to handle internal andexternal messaging
•CEO stopped public comment
• Launched a “rally the troops”
information campaign targetingemployees (but not the customers!)
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Protect Our House
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The Result?
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The crisis becomes real
• Anxious andconcerned customersbegin to withdraw
funds from CW Bank
• Senior managersdeployed to locationsto calm and inform
• Media focus shifts tothe behavior andcharacter of CW
executives
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And what happened to
Paul?• Barred for life from
trading andassociating withtraders for rumor spreading onanother company(ADS)
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Lexus Division
What happens whena brand founded on
the slogan "TheRelentless Pursuit of Perfection" turns out
to be imperfect?
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In December, 1989• A cruise control defect triggered the recall of EVERY CAR
SOLD TO DATE -- 4 months after the launch of Lexus
• Mercedes & BMW were “having a field day”
• At best: embarrassing. At worst: potentially lethal for thestartup Lexus brand.
• Keep in mind...2 years prior, Audi’s unintended
acceleration situation and THEY mishandled it, andsales dropped 50%. Audi claimed driver error for accidents, saying drivers mistakenly stepped on theaccelerator not the brakes.
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The Lexus CovenantEvery dealer signed the "LexusCovenant," which says in part thatLexus cars will be "the finest ever
built" and "Lexus will treat eachcustomer as we would a guest inour home."
Doing the right thing, Lexus-style,
meant picking up the cars,replacing the appropriate parts,filling the cars with gasoline,washing them and taking them
back again, in a hurry.
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The Turning Point
•Less than 100 Lexus dealers in theUnited States.
•Some customers lived hundreds of miles from the nearest dealership.
•Lexus flew in technicians to do thework on the spot, including for oneowner in Alaska.
•Under normal “recall” conditionsthe task would have taken 1 year --Lexus got most of the repairs donein a few weeks.
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Reputation Recovery
•What we think of as the Lexusreputation was formed NOT fromthe launch, but from their response to this “crisis”
•Lexus enjoyed unprecedentedcustomer loyalty as a result
•They demonstrated a basic truth
about reputation management -often the RESPONSE says moreabout the company than theoriginal damage
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The 18 Laws of Rep Risk Mgt.1. Maximize Your Most PowerfulAsset
2. Know Thyself - Measure Your Reputation
3. Learn to Play to Multiple
Audiences4. Live Your Values & Ethics
5. Be a Model Citizen
6. Convey a CompellingCorporate Vision
7. Create Emotional Appeal
8. Recognize Your Shortcomings
9. Stay Vigilant to Perils
10. Make Employees ReputationChampions
11. Control the Internet Before ItControls You
12. Speak with a Single Voice
13. Beware of Reputation Rub Off
14. Manage the Crisis with Finesse
15. FIx it Right The First Time
16. Never Underestimate the
Public’s Cynicism17. Being Defensive IS OFFENSIVE
18. If All Else Fails, Change Your Name
Orange = Topic for BC Management Involvement
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Let’s Revisit the 8 Critical
Questions1. How do companies lose reputation? FAILURE TO PLAN & RESPOND
2. What triggers reputation loss? ALMOST ANYTHING
3. Were there distress signals? ALMOST ALWAYS
4. Why are so many companies struggling with tarnished reputations? THEY HAVE NO DEFINEDPROGRAM.
5. Who is ultimately responsible for losing reputation? THE CEO
6. What does it take to restore a damaged reputation? HONESTY, CONSISTENCY AND SOME OUT OFTHE BOX THINKING
7. What can a company do to safeguard its reputation from loss? PLAN, TEST, REVISE
8. Can a company build an enduring and lasting reputation in this day and age? YES!
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Resources & References
• Alsop, Ronald J. The 18 Immutable Laws of Corporate Reputation. New York, The Free Press,
2004.
• Deon Binneman’s Blog on Reputation RiskManagement http:/ /deonbinneman.wordpress.com /
• Gaines-Ross, Leslie. Corporate Reputation: 12 Stepsto Safeguarding and Recovering Reputation. New York, John Wiley & Sons, 2008.
