Is Your Business Reputation Protected Against Potential Risks?
Protecting the reputation of your business is crucial to its success, whether you’re a small independent company or a worldwide corporation.
Here Phil Cookson, partner at Roythornes Solicitors, gives his insight as to why having a plan, and following correct procedures early on, is key.
Running a business can be testing at the best of times, especially when you are faced with complex scenarios. Often reputational damage – the potential of a loss due to damage or a decline in your reputation – can be avoided, or made less severe, by how the organisation responds to any issues.
There are many ways a business can respond, and the early decisions are critical. It can be tempting to bury your head in the sand and try to avoid bringing attention to a difficult situation. However, this can have a substantial knock on effect in the future such as harming client and investor trust, eroding your customer base and eventually hindering sales.
An example of reputational damage can be seen at even the most profitable of businesses and untouchable of people. Earlier this year billionaire mogul Steve Wynn, aka ‘The Most Powerful Man in Vegas’, resigned as chairman and chief executive from his own casino company after sexual harassment claims were made against him by his ex-wife.
As a result of the scandal, shares have dropped by 38% since February this year, along with the substantial negative impact on the firm’s profit. Even though most cases aren’t of this media scale, these complex scenarios are unfortunately a lot more common than you may think.
The largest stock market drop in history was attributed to Facebook during the 2018 ‘Cambridge Analytica Scandal’ after the social media site failed to protect the private and personal data of more than 87 million users.
Not only did the firm record a loss of $120 billion as well as a $17 billion personal loss for the world-renowned founder Mark Zuckerberg, but Facebook also faced huge backlash from a reputational point of view.
The public grew increasingly angry as they started demanding details about how the company has mishandled their private data. There was even a #deletefacebook movement on Twitter urging users to actively delete their Facebook accounts.
With Facebook still in the recovery process from this damage, it’s evident that a tarnished reputation can bring any business plummeting despite a previously successful history. It also shows how quickly, and far, news can spread. A reputational set back can take years to recover from and, in the worst cases, end in liquidation and closing of the company.
It’s therefore imperative to have a strategy in place – know your business inside and out so that you are aware of any potential risks and have a plan in place to deal with the possible fallout. After all, failing to prepare is preparing to fail.