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Branding and Managing Reputational Risk


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Research  Note    



Branding  and  Managing  Reputational  Risk  


By  Emily  Oxenford  


Copyright  ©  2011,  ASA  Institute  for  Risk  &  Innovation    

Keywords:  reputation  risk,  risk  management,  brand  strategy,  organizational   brand,  crisis  prevention  

Abstract:  In  a  time  of  headline  grabbing  reputational  failures,  reputation  is  an   increasingly  acknowledged  vital  asset  to  organizations.  The  development  of   organizational  branding  can  be  an  important  piece  of  building  a  strong  

reputational  foundation.  Effective  management  of  risks  to  reputation  requires   organizations  to  prepare  and  plan  for  the  events  and  incidents  that  risk  damage   to  their  reputations.  Through  clear  and  consistent  communication,  training,   leadership,  and  planning,  organizations  can  better  prepare  and  survive  the   reputational  tests  that  every  organization  faces.  




Billionaire  businessman  Warren  Buffett  once  said,  “It  takes  20  years  to  build  a   reputation  and  five  minutes  to  ruin  it."  And  we  have  seen  the  truth  of  that  in  recent   years.  There  have  been  many  well-­‐established  organizations  and  individuals  that  have   faced  defining  moments  that,  depending  on  the  choices  made,  determined  survival   beyond  that  key  turning  point.  It  is  how  organizations  prepare  for  and  handle  these   moments  that  define  their  future  reputations.    

While  everyone  knows  that  there  are  many  dangers  and  risks  that  exist  in  the   world,  the  risks  associated  with  reputation  and  brand  can  be  particularly  tricky.  This   stems  from  the  fact  that  while  there  are  actions  for  strengthening  and  protecting  a   reputation,  ultimately  the  power  to  control  reputation  rests  in  the  hands  of  others.   Organizations  and  individuals  are  increasingly  recognizing  the  critical  importance  of   preparing  for  and  facing  these  risks,  particularly  in  the  age  of  instant  and  easily   replicable  communication.    

Brand  and  Reputation  

The  ideas  of  brand  and  reputation  are  certainly  related  to  each  other,  though   there  are  a  few  distinctions  that  can  be  made  between  the  two.  While  there  is  not   universal  agreement  about  what  these  differences  necessarily  are,  it  is  important  for  an   organization  to  think  the  two  parts  through.      

Reputation  can  be  summed  up  as  the  ideas,  beliefs,  expectations,  and  opinions   that  are  held  (in  general)  about  something  or  someone.  The  perception  of  an  

organization  does  not  necessarily  have  to  be  based  on  truth  or  reality,  but  is  simply  the   way  that  someone  or  something  is  thought  about  by  others.  And  reputation  has  been  


shown  to  be  an  escalating  factor  in  both  business  value  and  customer  behavior.  One   report  found  that  the  intangibles  like  reputation  actually  account  for  a  majority  of   organizational  assets,  particularly  in  service-­‐oriented  firms  (Tonello  6).    

Brand,  on  the  other  hand,  is  not  as  neatly  summed  up.  Maria  Ross  writes  that   brand  can  be  thought  of  as  “the  personality  and  soul  of  an  organization  communicated   in  various  ways  “(8).  Bill  Taylor  talks  about  for  an  organization  “your  brand  is  your   culture,  your  culture  is  your  brand”,  in  the  sense  that  internal  factors  can  play  just  as  an   important  part  of  building  external  brand  as  the  other  brand  initiatives.  An  organization   does  in  general  have  more  control  over  building  and  shaping  brand.  But  brand  is  not   simply  good  public  relations  or  a  strong  marketing  campaign,  but  rather  all  the  

interactions  and  actions  of  an  organization  both  internally  and  externally.    Brand  is  part   of  reputation,  and  a  well-­‐developed  brand  can  help  protect  reputation  in  times  of  crisis   and  business-­‐interruptions.  Building  a  clear  and  consistent  brand  is  critical  especially  for   businesses,  Ross  stresses.  “Brand  clarity  attracts  customers  and  brand  consistency   makes  them  stick  around”  (25).    

Reputation  and  Digital  Communication  

Traditionally,  brand  was  built  by  companies  through  mass  media  (newspaper,   radio,  the  few  main  television  channels)  and  was  considered  more  about  advertising  and   marketing  than  about  the  portrayal  of  the  company  in  its  entirety.  Word  of  mouth  and   informal  communication  between  customers  is  also  not  a  new  concept,  but  the  medium   of  the  Internet  has  changed  the  rate  and  ease  by  which  these  opinions  and  ideas  are   shared.  Competitors  and  potential  customers  alike  both  have  unprecedented  access  to   consume  and  create  editorial  commentary,  consumer  reviews,  news  articles,  and  the  


like  about  both  companies  and  individuals.  Reputational  risk  therefore  must  be   incorporated  into  all  areas  of  risk  management,  including  communications  and  

customer  relations.  And  information  access  can  be  a  two-­‐way  street.  Organizations  can   now  also,  faster  and  easier  than  ever,  keep  an  eye  on  relevant  public  opinion  and   perception  through  monitoring  digital  sources  and  gathering  customer  feedback.   Reputational  Risk  

Damage  caused  from  a  reputational  or  branding  failure  can  result  in  multifaceted   and  long-­‐lasting  consequences.  For  example,  the  recent  security  breach  of  EMC  Corp’s   RSA  division,  which  resulted  in  the  attack  on  defense  contractor  Lockheed  Martin  Corp,   has  already  injured  a  previously  stellar  reputation  that  will  likely  be  difficult  to  regain.  It   takes  around  three-­‐and-­‐a-­‐half  years  to  recover  from  an  event  resulting  in  reputational   damage  on  average,  though  the  companies  with  strong  track  records  tend  to  recover   easier  (Tonello  9).  Brand  and  reputation  matters  for  organizations  both  large  and  small,   and  can  be  impacted  both  directly  and  indirectly  by  direct  risks  as  well  as  risks  to  

associates,  suppliers,  and  partners.  Reputational  risk  is  increasingly  acknowledged  as  a   very  complex  part  of  risk  management,  and  the  most  difficult  to  manage.  Reputation   can  be  a  major  competitive  advantage,  and  a  major  source  of  disaster.  Preparing  for  the   worst  and  having  a  plan  for  the  inevitable  events  that  happen  is  part  of  successful   reputational  protection.  

Johnson  &  Johnson:  Reputation  Managed  Well  After  Crisis  

The  tales  of  poorly  managed  reputational  incidents  are  numerous,  but  it  is   important  to  highlight  the  actions  taken  by  those  who  have  survived  and  overcome  the   risks.    


Johnson  &  Johnson’s  swift  and  decisive  Tylenol  recall  in  1982  reveal  several   important  factors  in  managing  reputation  in  a  time  of  crisis.  After  seven  people  died   from  cyanide-­‐laced  Tylenol  capsules,  a  painkiller  product  responsible  for  17%  of  the   company  net  income  the  previous  year,  Johnson  &  Johnson  recalled  31  million  bottles.   Yet  the  market  share,  which  had  dropped  30%  after  the  crisis,  was  almost  completely   recovered  a  year  later  after  the  recall  and  relaunch,  and  the  brand  remains  strong  today   (Rehak).  This  case  highlights  a  few  particular  actions  that  revealed  how  reputation  can   be  managed  even  in  the  aftermath  of  a  deeply  damaging  event.  

1. Johnson    &  Johnson  made  it  clear  that  the  safety  of  their  customers  was  their   number  one  concern  through  the  recall,  which  was  at  the  time  an  unprecedented   action.  Part  of  a  reputation  is  following  through  with  action  the  promises  that   have  been  made.    

2. The  company  chairman  at  the  time,  James  Burke,  was  seen  as  being  very  upfront   with  the  public  and  the  media  about  the  entire  ordeal.  Strong  leadership  and   consistent  communication  combined  with  the  persistent  customer  care  helped   protect  the  brand  Johnson  &  Johnson  had  already  developed.    Johnson  &   Johnson  showed  they  had  control  over  the  situation,  and  committed  to  fix  the   problem  so  it  would  never  reoccur.    

3. Recovering  from  a  crisis  is  expensive  in  many  ways,  and  still  the  company  took   the  initial  financial  hit  to  fully  address  the  problem.  Over  $100  million  was  

invested  after  the  incident  (Rehak),  with  a  number  of  follow-­‐up  campaigns  in  the   following  years.  Not  all  organizations  have  the  capital  to  spend  on  the  scale  of   Johnson  &  Johnson,  but  the  action  of  spending  money  on  fixing  the  problem  was   a  clear  message  to  the  consumer.  And  the  financial  and  business  results  have  


been  clear  –  Johnson  &  Johnson  has  been  paying  out  increasing  dividends  for   decades  (Rehak).  

Making  Your  Reputation  and  Brand  More  Resilient  

There  are  a  number  of  ways  to  work  as  an  organization  and  as  an  individual  on   building  a  strong  brand  and  a  more  resilience  reputation  before  a  crisis  or  incident  even   occurs.  Taking  proactive  action  can  mitigate  or  even  prevent  some  of  the  negative   consequences  that  are  associated  with  a  negative  failure.    


1. Know  your  brand.  Identify  what  the  “heart  &  soul”  of  your  organization  is,  and   clearly  define  what  that  means  in  the  practical  terms  you  can  control.  Brand  is   not  just  a  logo  or  business  paraphernalia,  but  identifying  how  brand  is  manifested   through  those  means  is  important  to  know.    

2. Once  you  have  defined  it,  keep  the  message  clear  and  consistent.  Whether  it  is   formal  communication  or  informal  behavior,  a  strong  reputation  relies  on   customers  and  the  public  seeing  and  hearing  the  consistent  brand  of  the  

company.  Identify  who  is  responsible  for  speedy  and  clear  communication  after   an  incident.  A  quick  and  effective  response  to  an  issue  can  be  the  most  valuable   pillar  of  keeping  a  strong  reputation.    

3. Strong  leadership  is  key,  but  as  Taylor  mentions,  brand  is  part  of  internal  

organizational  culture  as  well.  Responsibility  for  organizational  reputation  starts   at  the  top  leadership  and  goes  all  the  way  down.  Communicate  and  train  

employees  in  acceptable  behavior  (in  both  the  physical  and  digital  realms)  and   make  sure  organizational  expectations  are  clear.  For  example,  an  organizational  


social  media  policy  that  is  both  appropriate  and  understood  by  employees  can   help  protect  from  accidental  reputational  damage  from  within.    

4. Build  your  digital  identity  and  increase  online  reputation  resources.  What  does   that  mean  exactly?  When  the  inevitable  incident  happens  an  organization  is   going  to  want  anyone  searching  online  for  the  company  to  have  positive  search   results.  So  before  the  crisis  happens,  proactively  build  your  reputation.  Upload   and  create  links  between  organizational  content,  whether  that  means  reviews,   news  pieces,  social  media  sites,  publications,  or  videos.  Redundancy  is  often  a   positive  feature  online  –  you  want  people  to  be  able  to  find  things  easily,  and   connections  across  the  web  strengthen  search  engine  results.  



Much  of  reputation  risk  management  is  as  much  about  crisis  prevention  as  it  is  about   management  after  a  crisis.  Preparing  and  planning  for  the  unexpected  is  not  a  simple   action  nor  is  it  without  cost.  But  the  process  can  have  significant  positive  returns  for  the   organizations  that  invest  in  building  their  brand  and  making  their  reputations  more   resilient.    











Finkle,  Jim.  "Hacking  Crisis  Costs  EMC  Reputation  in  Security."  Reuters.com  8  Jun.  2011:  n.  pag.   Web.  9  Jun  2011.  <http://www.reuters.com/article/2011/06/08/us-­‐emc-­‐security-­‐


Rehak,  Judith.  "Tylenol  Made  a  Hero  of  Johnson  &  Johnson  :  The  Recall  that  Started  them   All."  The  New  York  Times  23  Mar.  2002:  n.  pag.  Web.  08  Jun  2011.  


Ross,  Maria.  Branding  Basics  for  Small  Business:  How  to  Create  an  Irresistible  Brand  on  Any  

Budget.  Bedford,  IN:  NorlightsPress.com,  2010.  Print.  


Taylor,  Bill.  "Brand  Is  Culture,  Culture  is  Brand."  Harvard  Business  Review  27  Sep.  2010:  n.  pag.   Web.  09  Jun  2011.  


Tonello,  Matteo.  "Reputation  Risk:  A  Corporate  Governance  Perspective."  Compliance  Week.   The  Conference  Board,  2007.  Web.  8  Jun  2011.  




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