The Importance of Reputational Risk Management in Enterprise Risk Management

Managing risk management at your company is an important part of being prepared for whatever might come your way. But, what do you do when a potential threat to the reputation of your company appears? In the past, reputation has been dealt with through the strict administration and controlling of very specific areas of loss, such as legal, financial, regulatory, and claim-related. That mindset is changing, as companies at the forefront of risk management give reputation its own assessment, control, monitoring, and reporting process, and some companies are even assigning a “reputational risk manager” to deal with reputational risk within the company. Below are six steps to better manage your company’s Enterprise Risk Management (ERM), according to

Step 1: Stay Calm in the Face of Adversity

When initially faced with a hit to your company’s reputation, remaining calm in the situation is the most important first step. By remaining calm, you will be more able to assess the situation with an open mind and be less apt to react illogically, further damaging your reputation.

Step 2: Prioritize Your Risk

By dealing with reputational risk as a standalone issue not tied to other areas of your overall ERM, you can deal with reputational risk in a more direct means and adjust how you deal with that risk as the situation evolves. This approach also allows you to plan ahead of time and have the resources in place to deal with situations of risk as they arise.

Step 3: Realizing What the Risk Is

Recognizing the risk is just as important, if not more so, than the realization that a risk to your reputation exists in the first place. Developing procedures for different types of reputational risk, both direct and indirect, should go a long way toward helping to mitigate the impact that a loss of reputation can have on your organization.

Step 4: Once the Risk Is Known, Measure It

While it is hard to know the ultimate impact of a loss of reputation, doing your best to summarize the expected losses goes a long way toward allowing you to plan for whatever might come your way.

Step 5: Appoint a Risk Manager

An important step in the process of resolving current or future reputational loss is to appoint a single risk manager to help create a central point of contact. This manager should bring together information from different parts of your operation and coordinate a response to help alleviate, or reduce, any losses.

Step 6: Don’t Wait Around for Disaster to Strike

When designing your ERM program, create a program that lessens and manages losses from a public relations point of view. Also know what must be done to protect your company’s image and reputation beyond branding. Finally, respond to crises in a timely and well-coordinated effort.

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