Reputation risk has been around since commerce first began. It’s likely that we can all think of an organization whose long-established reputation was damaged by a single event or a sequence of events (either within or outside of their control).

For example, there have been many examples of firms’ reputations being damaged by clumsy marketing campaigns or poorly performing products and services, but these are rarely fatal. BP and Exxon’s reputations were severely damaged by environmental disasters, but they survived. However, the collapse of Enron also brought down their auditor Arthur Andersen, primarily because their reputation was damaged beyond repair.

Reputation itself is a critical asset, often considered intangible but having a significant impact on an organization’s success. It influences stakeholder decisions, affects customer loyalty, and can drive or hinder business growth.

In the modern dynamic world in which organizations operate, the range of reputational risks has increased, especially from emerging technologies or from external ‘bad actors’. This is exemplified by The World Economic Forum’s Global Risks Perception Survey 2023-2024opens in a new tab, which lists both AI and cyber-related threats in the top five material risks to organizations.

This article explores more fully where reputational risks may come from and, importantly, how to build a model for building reputation resilience across your organization, including how you might go about building quantitative measures that track your progress.

Guarding against reputational threats: The blueprint for a robust reputation management 

The potential impact of reputation risk

Reputation risk is the potential for negative publicity that can have profound and far-reaching consequences for organizations. Financially, they can lead to decreased sales, stock price declines and higher operational costs (as companies may need to invest in damage control efforts or face legal penalties). Customer trust and loyalty can be severely compromised, leading to long-term erosion of the customer base and market share.

Additionally, reputational damage can strain relationships with key stakeholders such as investors, regulators and partners, potentially resulting in the loss of investment, increased scrutiny and disrupted business operations. In severe cases, reputation risks can trigger leadership changes, employee dissatisfaction, and talent retention challenges, as well as affect future growth prospects.

Reputation risk can arise from various sources, including unethical behavior, governance failures, operational disruptions, product recalls or environmental incidents. Unlike other types of risk, reputation risk is often interconnected with other risks, amplifying their impact.

Ultimately, reputation risks, if not effectively managed, can undermine the organization’s overall competitiveness and sustainability in the market.

The need for reputation resilience

An organization’s ability to maintain and protect its reputation despite facing crises, challenges or changes in the external environment is known as reputation resilience.

Reputation resilience involves the capacity to anticipate potential threats to reputation, respond effectively during a crisis, and recover or even strengthen reputation post-crisis. Reputation resilience combines proactive measures, effective crisis management and long-term strategies to ensure that the organization can withstand and adapt to reputation-related challenges.

To build reputation resilience, a reputation management framework is desirable. 

Reputation management framework

A reputation management framework is a structured approach to systematically manage, protect and enhance an organization’s reputation. It integrates various strategies, processes and tools to ensure that reputation is maintained as a key strategic asset.

The framework typically includes:

The reputation management framework should feed directly into a reputation resilience framework to help build enduring trust.

Crafting reputation resilience: A strategic framework for enduring trust 

Reputation resilience framework

A robust reputation resilience framework integrates proactive reputation management with crisis preparedness and long-term strategic planning. The framework focuses on the integration of internal and external elements to build, maintain and protect an organization’s reputation.

This framework provides a structured, holistic approach, aimed to ensure that both internal and external drivers of reputation are strategically managed for long-term resilience.

Consider your own ability to drive preparedness across this framework: