Speed Kills: Reputation Attains Top Rank as a Corporate Strategic Risk

There was a simpler, happier time when it was all about the numbers: sales, profits, compound annual growth, quarterly reports. The investor relations staff spoke to the business press, with perhaps a few extra details provided for trusted reporters. Embargoes were observed, the corporate veil was never pierced and privacy was respected.

It was, in other words, like a fairy tale. And like such fantasies, this took place in what now appears to be a never-never land.

Privacy is non-existent, respect is for sale and rules are for suckers.

There has been a significant change in the competition for data, information and knowledge. The internet has rendered the old standards passe. Blogs, Twitter, YouTube, Instagram, Pinterest, Facebook: all have become powerful forces for determining the success or failure of initiatives and the enterprises who launch them. Numbers? Who says yours are any better than mine? And it all happens at warp speed. There is no time to plan a response: one simply responds or, if they are better organized, they anticipate the issue - probably one of a range of possibilities - so they are prepared. And 'they' is probably no longer an investor relations staff: those positions got cut in 2007 - they are senior executives because no self-respecting securities analyst would be seen talking to anyone other than the CEO or CFO these days anyhow.

The reality, as the following article explains, is that reputation has become a corporate priority. But not, interestingly enough, because there is a perceived need for better behavior or performance. No, the imperative is that plethora of unknown and possibly unknowable commentators who have welcomed themselves to your world without so much as a by-your-leave. They are fast and their insights can be deadly. So strategic risk is no longer a linear plot. It's an existential threat from asymmetric sources. Even firms like McKinsey, which would never previously have bothered with anything as soft and inconsequential, is now peddling corporate social responsibility management solutions.But unless there is a correlation between the perception and actual performance, the perception will remain unstable.

The implication is that intangibles like reputation are now corporate priorities because the speed and power of the methods by which they can be focused and disseminated demand it. Any organization that fails to prepare for these forces will be victimized by them. JL

Tatiana Serafin reports in Forbes:

"The speed of risks is so much greater now, and as a result you have to be more prepared – faster to respond than you were in the past. That’s one of the biggest differences today versus even three or four years ago.”
In a recently released report that I worked on, “Exploring Strategic Risk: 300 executives around the world say their view of strategic risk is changing,” corporate risk officers were buzzing about the the impact of lightening speed tweets and blogs on corporate reputations. Twitter’s impending IPO may push the envelope even more.
Take giant marketer Coca-Cola KO -0.03% whose Phil Maxwell, Director Enterprise Risk Management, told me “It used to be that if certain risks were to happen, a company could have up to a news cycle to respond.

The sense of needing to be more prepared was found across all the respondents in the global survey of strategic risk management practices at more than 300 major companies around the world. Consultancy Deloitte and Forbes Insights worked on the survey to uncover not only concerns about the changing nature of strategic risk but also best practices in handling change.
Some top line results:

• Strategic risk management is a CEO and board-level priority. Two thirds (67%) of the surveyed companies say the CEO, board or board risk committee has oversight when it comes to managing strategic risk.
• Technology enablers and disrupters, such as social, mobile, and big data, could threaten established business models, and 91% of companies surveyed have changed their business strategies since those technologies began to emerge.
• Human capital and innovation pipeline are expected to be the top strategic assets that businesses will need to invest in.

Being innovative to respond to change is the refrain I heard most often in the near dozen interviewees I conducted for the survey.
“Innovation and the ability to be a step ahead of the competitive market is a key strategic risk for all organizations,” Chief Risk Officer Australia, ANZ ANZ, Jennifer Evans told me.
Her banking point of view was shared by Elisabeth Pacaud, Associate Vice President, Group RiskManagement, at pharmaceutical giant, Sanofi SNY +1.15%who said, “A strategic risk is one that directly impacts the company’s identified strategic goals whether they are diversification, innovation, or emerging countries.”
Innovation will enable corporations to come to terms with the rapid pace of change in the social media space, and will enable them to manage reputations for the long-term.
Sums up Sandra G. Carson, VP, Enterprise Risk Management and Compliance, Sysco SYY -0.22% Corporation, “Companies should seek new capabilities and approaches for managing strategic risk. In particular, they should now consider a much broader set of risks and strategic assets – including people, intellectual property, customers, marketing efforts, and even “the crowd.”