Many Irish businesses not equipped to deal with reputational risk

One in three senior executives in Ireland believes their company does not have the appropriate processes in place to respond to an event that could cause reputational risk, a new survey on governance has found.

Of the executives surveyed here, 38 per cent said their organisation did not have a clear understanding of how its image and brand reputation were perceived by stakeholders.

These are some of the main findings from a study of more than 120 multinational company board members and their advisers – including 50 in Ireland – in Europe and the US. It was carried out by ReputationInc, a leading international management consultancy with an operation in Dublin.

Some 54 per cent of the senior executives who responded believed that their board members lack the understanding and tools to effectively oversee opportunities and risks to corporate reputation.

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The survey found that 85 per cent of executives agreed that managing reputation was more important and challenging today than in the past, yet 90 per cent claimed that reputation measurement was not built into the performance evaluation of the leadership team.

Expectations

Among the top reasons why corporate governance frameworks fail, the business leaders said stakeholder expectations were not sufficiently taken into account.

They also noted the effects of short-termism driven by quarterly reporting, and commented that corporate values were not properly anchored.

All of the respondents said an organisation’s culture had the greatest influence on corporate governance, both positive and negative.

Commenting on the findings, John Keilthy, managing partner at ReputationInc in Dublin, said: "In the new world of reputation management, the role of governance is becoming critical for business success. Unfortunately our research shows that board leaders, despite the ever-increasing governance failures, still don't have the knowledge and tools to oversee their reputation.

Manage risks

“Organisations with good reputations have a foundation of measurement in place, and are focusing their efforts on cross-stakeholder dialogue to leverage opportunities and manage risks, and, most importantly, in holding their leaders accountable. Organisations need to stop viewing reputation as a risk and instead view it as an opportunity.”

The research involved interviews with business leaders from a range of sectors, including consumer goods, finance, health, and non-governmental organisations. It was carried out between November 2016 and January 2017.