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Five Questions Directors Should Ask About Reputational Risks

by M&Co. Staff

Montieth & Company’s CEO and Global Managing Partner, Montieth M. Illingworth, featured in Agenda, answers questions Directors should be asking about reputational risks, such as how to measure reputational risks and more.

In light of these trends, Agenda asked several risk experts to identify five questions directors can ask senior management on how to better mitigate and identify these reputational risks. Offering insight are reputation value insurer Nir Kossovsky of Steel City Re, Jonathan Salem Baskin of consultancy Consensiv, and Montieth Illingworth, president of Montieth & Company, a crisis advisory and communications firm.

From Montieth Illingworth:

1. At the board level, how do we measure not just reputational risk but also reputational loss and reward?

Reputational risk resides in an organization’s bonds with its stakeholders—employees, investors and business partners. Regulators and policy makers are also rising in importance post-financial crisis. The risk is in any disruption of those key stakeholder relationships. So, what you’re measuring is the extent to which stakeholders understand and support the organization’s mission, principal initiatives, and leadership. Any diminishment in that understanding and support is a loss; any gain is a reward. Measuring risk, loss, and reward is done simply by conducting conventional opinion-and-perception surveys among stakeholders on a regular basis.

2. How does the business proactively monitor, evaluate, and anticipate the reputational risks we face and then prioritize them?

The board must know that every signal has to be paid attention to, and no one should be saying, “That’s nothing to worry about.” If something registers as a legitimate reputational issue that’s worth monitoring, then the business is halfway there to dealing with it properly when an issue converts into a crisis.

We recommend forming a senior interdisciplinary working group of communications, brand, legal, compliance, operations and investor relations to establish monitoring criteria and systems that can evaluate all stakeholder “inputs.” This group must have a direct reporting line to the CEO. If that’s not possible, the team must be able to speak directly to a head of risk management or with the general counsel. This group is tasked with assessing the risks and making initial recommendations for action.

3. Is the board able to comprehend and assess a major reputational issue, or crisis, when it strikes?

How the company communicates a reputational challenge to the board is a big challenge for any organization. The key is to update the board frequently and in layman’s terms so that it has a baseline familiarity with the organization’s “risk status.” Effective boards have formed subcommittees with broad risk management responsibilities in which reputational issues are included.