Can Reputation be a RISK?
(A post from my experience on the power of a Good Reputation)
Risk assessment has typically been associated with Safety Issues in most companies. Back in February, I wrote a post to this blog on the Carnival Triumph disaster, (see: Carnival Triumph: Evidence of Lack of Control.) In addition to the lack of planning, Carnival did not even consider what a disaster would do their REPUTATION. Is there a cost involved in reputation? The Carnival example proves the extensive costs associated with a debacle of that size. If management had planned and highlighted potential risks, the fire in the engine room could have been prevented or at least mitigated. Then management’s decision to by pass a dozen ports and keep the customers on board for an extra 5 days was NOT using "profound" knowledge at all. The result was a tremendous blow to Carnival’s reputation and millions of dollars in cancelled vacations and loss of loyal customers.
|Carnival Triumph incicendt deeply tarnished Carnivals reputation|
The reputation of a business is essential to its survival. The trust and confidence of the consumer can have a direct and profound effect on a company’s bottom line. Recently, the importance of reputation has become increasingly apparent, as companies such as BP and Toyota have had to cultivate their responses to crises in order to maintain the reputation and standing of their companies to the world.
How do people view your Business? Trustworthy? Honest? Greedy?
|Example Risk Assessment with Reputation included. This|
example is from the SMS Memory Jogger II. (GoalQPC Publishing).
In the Safety Management System, SMS, world Risk Assessment is mandatory and an integral part of the Management System. Since I have been involved with Aviation companies that have experienced problems, I realize the need to include “Company Reputation” in the Risk Matrix. Here is an example of the inclusion of the company reputation in a risk matrix, (this example is from the SMS Memory Jogger II; goalqpc.com).
If an organization has a good reputation in the marketplace, consumers may have a preference for that company even if there are similar businesses offering the same products or services even for different prices. The reputation of an organization can enable a company to differentiate its product in highly competitive markets. A company with a great reputation will allow it to have premium pricing. Reputation can become the ultimate factor in whether a customer decides to patronize one business over another. It is important to assess the “Risk” of a tarnished reputation.