Alastair McCapra explains why having reputational risk on your radar is becoming a matter of urgency.

Google Trends shows that searches for ‘reputation damage’ remained low during the 2008-9 financial crisis and stayed low over the years that followed.  There was a huge spike in searches around the time that FTSE 100 company Thomas Cook collapsed in September 2019 and, with some variation, it has remained high ever since. Would it be fair to assume, then, that since 2019 FTSE-100 companies have had reputational risk clearly on their radar? 

Surprisingly, the answer to that question appears to be ‘no’. Our research shows that in 2023, half of FTSE 100 boards and executive leadership teams still lack a director of comms, director of corporate affairs, or similar dedicated position. The lack of progress over the last year is against the backdrop of surging inflation that makes communication with customers, employees and suppliers more important than ever. 

Communications expertise is lacking

Reputational risk will be on most organisations’ risk registers, yet in comparison to financial, regulatory or operational risk, the infrastructure for managing reputational risk lags behind. By having a dedicated communications expert at board level, this way risk can be effectively managed. 

Yet, half of FTSE 100 firms lack this expertise, and a sector breakdown provides further interesting contrasts. All firms in the banking and media sectors have communications expertise on their boards, arguably, not surprising given that both sectors are regularly objects of public anger, criticism and customer activism. This is because both are regulated, so the level of public scrutiny on them is expected to be unusually high. 

Communications representation on boards in the construction and materials sector was extremely limited, in direct contrast. Perhaps due to the B2B nature of many businesses in the sector, they may feel they have increased resilience in the face of most reputation risks. As ESG rises rapidly up the corporate agenda and the public grows more alert to greenwashing, there are emerging reputational risks that businesses may not have fully considered.

Preparing for the worst

FTSE 100 organisations will all have experienced crises before, to varying degrees of seriousness, so may feel that they can manage the next crisis the same way they did the last major one – perhaps ten years down the line. That’s unlikely to be true.  While chairmen and CEOs could previously wait for a situation to become critical before deciding to resolve it, often by hiring crisis comms or reputation management specialists to assist them, today crises can explode with very little warning. We might think of recent examples such as the claims by former staff that have severely damaged the CBI, or indeed the huge public row over ‘debanking’ that led to the resignation of Alison Rose from Natwest. 

This emphasises that having the right communications expertise on board, rather than bringing in crisis experts once the situation has broken, can ensure that a crisis doesn’t break all. Preparedness is key to managing an issue down so that it never becomes a crisis, and if the unavoidable happens, an efficient and well thought out response can be critical. 

The right expertise

Having the right expertise on your board means risks can be identified and navigated more effectively. It also means businesses can better understand their employee and customer views, be ready with key messages for scenarios they have planned for, and respond quickly to worried suppliers, angry customers, anxious shareholders and inquisitive journalists.

Over the past year, firms have been occupied with spiraling costs, an uncertain regulatory environment, skills shortages, and trade friction. While boards will no doubt have been paying attention to these issues, crises rarely erupt because nobody is paying attention.

In today’s highly volatile operating environment, risks are multiplying and response time is shortening. The UK needs successful, thriving companies, and public relations capability at a strategic level is a key part of assuring that our firms outperform their international rivals.