INSIGHTS: CORPORATE REPORTING CAN ENHANCE REPUTATIONAL RESILIENCE
This year's Evolution of the Annual Report conference takes place in London on 13 September. MSL Group is sponsoring the session on reputational resilience
Why campaign to improve reputational resilience? Because it is often the biggest risk you face. And, perhaps surprisingly a world where reputation can be destroyed at digital speed, reputational resilience is frequently no one’s job.
Companies are often great at building their brands but nowhere near as good at enhancing reputation, even though they are two sides of the same coin.
Brands are what companies want people to think about the stuff they make or services they provide. Reputation is what people actually think. You may get away with having a strong brand and a weaker reputation for a while, but it is unlikely to last long.
A brand crisis can be tough to handle but the issue can often be resolved. Fixing reputation is tougher: it is like being caught out in a personal betrayal and asking for another chance. Begging for forgiveness is never fun but the chances of success are higher if your reputation is good and the crime is perceived as out of character.
The corporate report can be a useful repository for reputation enhancing stories if it is looked at through the lens of stories of value which, while rarely headline grabbers, can be just the kind of collateral needed to build up long term reputational resilience.
Organisations which focus more on their reputation will be in a stronger position in the long run and when the crisis hits – and it almost undoubtedly will – that’s when the power of brand resilience really comes into its own.
Just ask Volkswagen. The emissions scandal, which many predicted would result in the break up of the company saw VW’s share price almost halved in the immediate aftermath. Fast forward two years after the initial revelations and the company’s price was up 10% on pre-crisis levels. The company was outselling Toyota and General Motors by volume and VW was actually more profitable than it had been before the crisis.
VW is reputational resilience in its most extreme form. The company – some might say the whole German engineering sector – had spent decades building up resilience as a bankable asset and when they really needed to they were in a position to make a very large withdrawal.
Now, that’s not to say that there wasn’t a hell of a lot else that VW did right in recovering from the biggest crisis in its eight decade history but the recovery would not have been possible if people had stopped buying their cars. And they didn’t – well not for very long anyway.
Why didn’t they? Lots of reasons of course but reputational resilience was crucial. Were people appalled at what VW had be caught doing? Of course they were but that in itself was key: it was VW and it was a huge story in large part because that’s just not the sort of thing anyone expected from them. It was a betrayal and they needed forgiveness.
According to Deloitte’s crisis resilience survey, 74% of senior executives said that there were warning signs of most crises but only 62% said they acted on them. Almost all those same executives said organisations could prepare for a crisis but only just over half said they believed their organisation was prepared.
There is no single answer as to why organisations don’t prepare for crises but it is perhaps as much about human nature as anything. Like going to the gym or defrosting the fridge, it is often one of those things we are all too busy to do. It also asks that we focus on things we would rather ignore.
Campaigning on the stories of value that can be part of a strong corporate report can be a positive experience for a company, enabling it to focus on the core of what it does and assessing if reality supports the values it professes to hold. It is useful internally as a test of whether the company is on track and externally as a way of building reputation.
That builds up reputational resilience and prepares organisations for the issues and crises that now moved faster and are harder to predict than ever before. It involves a new way of thinking about reporting by evolving the report from a prescribed list of what a company has done towards more of a forward looking illustration of the future it wants to build and why we should believe in it.
Since 79% of the executives in the Deloitte survey said they had faced a crisis event in the past year, building reputational resilience is time and money well spent.
Simon Harrison is a senior director at MSL Group