When an organization is in the news facing a significant threat to its reputation, it is important for all organizations to take a step back and ask, “What can we be doing better?”
On December 2, 2011, Schneider Downs & Co., Inc. held its quarterly nonprofit breakfast briefing. Susan Kirsch, Shareholder, CPA, JD, and Jim Yard, Shareholder, CPA, CIA, CISA, discussed the critical importance of a nonprofit organization’s reputation and factors to consider when evaluating risks that could jeopardize an organization’s reputation.
Reputational risk is regarded as the greatest threat to a company’s market value, according to a study by the Economic Intelligence Unit, and it is the starting point of all risks. If you have no reputation, you have no business; however, it is viewed by executives as a risk that is more difficult to manage than other types of risk. These events can be referred to as “black swan” events because they are rare in occurrence but can be devastating to an organization. The consequences of a damaged reputation in today’s media-driven society include revenue reduction, the significant costs associated with litigation and crisis management, if a damaging event were to occur, and the decrease in constituency confidence.
An organization’s Board and senior management should assess its top five reputational risks and be prepared to handle a potential “black swan” event.
At the conclusion of the presentation, attendees were given a list of “to dos” to help them in their assessment of their organization’s reputational risk. This list includes the following:
- Assessing the organization’s policies and procedures, such as conflict-of-interest and whistle-blower policies, and assessing the monitoring practices with the Board and the organization with respect to those policies.
- Engaging the Board and senior management team in a discussion regarding specific risks to the organization.
- Preparing or updating a crisis management plan.
- Being prepared to act quickly and thoughtfully at the onset of a potentially damaging event.
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