Issue, Risk and Reputation Management
How it works
The proactive behavior, commonly associated with the initiative, creativity, and innovation, is required in today’s organizations. It can be a positive differential in times of market turmoil and uncertainty. According to Coombs, the best way to prevent a crisis in an organization is to have a proactive management. Proactive behavior is an element of change and it impacts the company’s performance. A proactive management seeks deliberately for changes and improvements, it anticipates the problems and chooses its own course to follow instead of getting carried away by the events.
The function of a proactive management is to monitor and collect information of warning signs, both, inside and outside the company. Then, analyze and evaluate this information to identify the ones with the highest potential to turn into a crisis. Coombs divided the chapter into issue, reputation, and risk management to explain how to avoid and mitigate a crisis, however, they are all interrelated.
The issue is a situation that, if not addressed in time and resolved, can affect the way an organization operates. So, the issue management must identify these issues and takes the necessary actions to resolve it before it becomes out of control. If an issue has enough pieces of evidence that it can become something that disrupts the organization’s performance, it may develops into a risk that can even affect the company’s reputation if not addressed in time. The company can attempt to solve an issue by changing their “”strategy option””. This infers the communication process to communicate the position of the organization on the issue to who it directly concerns. Sometimes, changing strategy option is not the best course to take, therefore, the issues management may have to change or modify the organization’s standards procedures.
Issues, different from risks, cannot always be foreseen in advance so it is hard to prevent. However, most of the time issues can be resolved if they are noticed rapidly. For example, a website has an outstanding issue that impedes users to apply coupons to finalize their purchase. This is an issue on which the company must address as soon as possible before losing credibility with their customers. In this case, a quick turn around to fix the problem along with a follow up e-mail to their affected clienteles could avoid the risk of the company losing customers, which can also damage the company’s reputation.
The reputation of an organization is the collective perception that stakeholders make of the images that a company transmits over time. These perceptions can be positive or negative, enhancing or denigrating a company’s reputation, respectively. The function of the reputation management is to influence the way stakeholders perceive and evaluate the organization as they interact with it, either, directly or indirectly. The direct relationship between stakeholders and organizations can create positive or negative reputation depending on whether the company meets the stakeholders’ expectation. A customer that have had bad experiences with a company will not only stop consuming their product but also will denigrate their image influencing others consumer as well. For example, using social media to share their frustrating experience.
Indirect interaction, on other hand, is when stakeholders drive their conclusion about an organization founded on other’s opinion or media reports. For example, a consumer that is shopping for a car and decide to ask their friends about their experiences. Depending on what the friends say will probably influence this consumer’s opinion if he should consider certain car brands or not. Yet, who never gave up buying something after reading bad reviews online? Or, sometimes we buy things that we don’t even need just because we heard someone had a great experience with it. In fact, these relationship organization-stakeholders, whether direct or indirect, is what builds the organization reputation. Therefore, the reputation management has as its main function keep this relationship as positive as possible to avoid conflicts and a possible crisis. Thus, identifying, monitoring and responding to internal and external risks and issues that impact stakeholder perceptions of credibility, quality, and other attributes can avoid the organizational reputation to be affected.
In 2013, supposed parts of a rat found inside a Coca-Cola bottle gave a lot of repercussion in Brazil. A consumer who has motor and speech difficulties said to have acquired the condition after consuming the contaminated product. He filed suit against the company. The effect was so devastating that the company denied what happened on its official channels on the internet and even launched a commercial that highlighted the rigor of the quality control processes of its products. The Court of Justice of S??o Paulo (TJ-SP), concluded in a decision of the first instance, that such a mouse never existed. However, the damage to the company’s image was already done, if Coca-Cola did not have a strong and well-established reputation and an effective reputation management, this event could have destroyed its credibility. Reputation, therefore, is not the result of a campaign that is implemented at a given moment, but a value that is built through a plan strategic of communication and effective management over time.
All organization has weaknesses that can potentially progress into a crisis. The risk management involves minimizing these weaknesses by reducing the company’s vulnerability. It can be done thru identifying risks arising from disruptive trends, technologies, and business models that can impact competitive advantage, market position, and long-term performance, destroying value or the corporate in its entirety.
Risks are associated with internal and external factors; however, the risk management usually focuses more on the internal aspects of the organization’s vulnerabilities that can influence the company’s defined objective, affecting factors such as cost, time, quality, and scope. In this way, when the risk is poorly managed it can materialize and becomes an issue. Once the risks are identified, some strategies must be put in place immediately to improve the organization’s infrastructure practices, policies, and methodologies. Otherwise, there is a high probability that what is only risks, turns into an issue that could potentially hurt the company’s reputation.
Kodak did not see how the risk of the new technologies such as digital cameras could impact their business. If the risk management detected such issue, the reaction was not timely enough to mitigate the problem and invest in the new technology. Eventually, this became a crisis for Kodak who saw their market share shrink because the customers started buying the new cameras from their competitors. This is an example of how important a proactive risk management is to an organization and how a risk can become a crisis and then eventually cause serious damage to a company. Fast enough, the Kodak’s reputation became jeopardized and the company struggled for years to come.
In summary, a proactive management is extremely important to an organization. It monitors the events, mitigates risks, solves issues, and improve the reputation of the organization focusing on both internal and external factors. Expectation handling is also vital in a proactive management because the stakeholder’s satisfaction is directed related to the company’s ability to set an expectation. The interrelationship between issue, risk, and reputation management is related to how fast and effective unwanted events are handled. As mentioned, an issue can become a risk when not addressed promptly and properly, or vice versa. Both issue and risk can compromise an organization reputation if the proper measures are not taken in a timely manner. Therefore, it is safe to say that proactive management is a key role in any organization.