Your company’s reputation is a priceless asset. When the character and credibility of your brand are publicly called into question, the damage can have a lasting and dramatic effect on enterprise value.
What is brand reputational risk, and how does it arise?
According to a recent Forrester Consulting Total Economic Impact™ study of Resolver Real-time Risk Intelligence, today’s empowered consumers are more opinionated, proactive, and vocal than ever — and brands can’t keep up. The proliferation of digital and social touchpoints lets consumer vocalizations spread like wildfire, often overpowering corporate messaging. As a result, most major B2C companies face multiple brand crises each year that can lead to significant recovery costs, lost sales, disrupted operations, security risks, and erosion of hard-earned brand reputation.
Brand damage and reputational risk from social media
The rise of social media usage has made reputational risk many times more challenging to handle and more urgent to manage. Suddenly the incidents that can damage your reputation are less predictable, faster-acting, and more volatile, thus making harmful online content a systemic risk to brands. Consider this: As of October 2020, the number of people using social media was more than 4.14 billion, or more than half the world’s population. Every minute of every day, millions of pieces of content are shared online. And, the global average for social media accounts is 8.8 per person.
Much of this activity is happening on the surface web (also called the visible web or indexed web), which represents just 4% of internet engagement. The deep web, which is closed to search engines and traditional monitoring tools, is 500 times larger than the surface web.
In other words, the volume, velocity and variety of digital chatter is compounding by the minute, and not everyone online has your brand’s reputation at heart.
Social media channels—from the platforms themselves to user-generated forums—have given consumers the ability to easily impugn the reputation of a brand with negative reviews or by amplifying lapses in corporate ethics and integrity. These days, even issues that seem insignificant can become headline news, and reputations can be battered by thousands of hostile comments.
Reputational risks can come from unethical partners, agents, suppliers, contractors, competitors, or other third parties. They can also come out of the blue from extremist groups who misappropriate your brand without your knowledge or permission, a practice known as hatejacking.
Company leaders are starting to recognize the gravity of risks to brand reputations posed by digital chatter on social media, and they are realizing that actors can intentionally or unintentionally use this channel to damage brand reputation, affect operations or reduce revenue.
This digital chatter can take the form of:
- Disinformation, misinformation, false narratives, misrepresentation, and misleading content.
- Antagonistic, harmful, or illegal content.
- Violence and threats against employees, customers, brand VIPs and ambassadors, or physical sites and assets.
- Leaks, breaches, and other cybersecurity incidents.
- Scandals or hate speech.
- Political and social polarization, activism, and campaigns.
- Misinterpreted, inauthentic, or polarizing statements regarding social issues.
- Coordinated physical or digital events and campaigns.
- Large, repetitive volumes of undesirable, hurtful, or irrelevant content.
- Content linking extremist views to a brand to claim legitimacy, known as hatejacking.
- Missed adverse events or compliance failures.
- Unknown unknowns.
It can be amplified both intentionally or unintentionally by:
- Dissatisfied customers or employees.
- Celebrities and influencers.
- Competitors.
- Misinformed social media users.
- Bad actors with malicious intent and trolls who intentionally antagonize.
- Conspiracy theorists.
- Individual activists, ideological objectors, politicians, and activist or political organizations.
- Sensationalist, partisan, activist, or biased media.
- Terrorists and hostile governments.
Unfortunately, brands struggle to identify and act on this myriad set of risks to reputation that are originated and amplified by actors through their digital chatter. To be able to effectively respond before the sparks of risk become the blaze of a crisis, brands must remain vigilant to quickly identify and address the actors behind known and unknown risks.
For communications leaders and executives, this uncertainty can be paralyzing. How can you protect your brand’s reputation in the face of this sweeping assault?
How to identify and prevent reputational risks
To start, maintain a strong brand reputation
According to Harvard Business Review, firms with strong, positive reputations attract better people, can charge a premium for products and services, have more devoted customers, have higher price-earnings multiples, and have lower costs of capital. Since up to 80% of a company’s market value is attributed to its “invisible assets” – such as brand equity, intellectual capital, trust, and goodwill – a reputational crisis puts the majority of a firm’s assets and valuation at risk.
As business markets head into a new reality for the remainder of the COVID-19 pandemic and beyond, communications leaders and executives must be prepared for the unpredictable and unknown. Safeguarding corporate reputation and brand value is now firmly on the agenda of those who must act strategically before a crush of harmful content becomes a reputational crisis.
As difficult as these challenges may be, successfully navigating them offers the risk-savvy communications leader an opportunity to own a seat at the executive table. To ensure successful risk mitigation and appropriate brand positioning and messaging, it is the communications executives who are now understandably on their CEO’s speed-dial to consult on risks. This aligns to the findings of our Communications Leaders Risk Survey, which found 88% of respondents say they are taking on greater responsibility in identifying and mitigating risks.
Communications leaders are uniquely prepared to go all in on brand purpose and values, seeing it as a chance to elevate their brands and build resilience. This demands a communications skill set that enables sharing cross-functional information with great sensitivity and consistency, and a deep understanding of audience needs.
It is not surprising that 75% of communications leaders surveyed say they are looked at by their organizations as a strategic advisor. This same 75%, however, narrowly define that role as specifically focused on how risks emerge and accelerate online via digital chatter.
Their role is critical to sharing timely and accurate messaging on all aspects of their business and are the “hub” of information flow. Emerging risks, like other news and information, are increasingly found first in digital conversations or chatter.
This often puts communications leaders in the position of “first to know” in the organization and key players in both identifying and mitigating known and unknown risks. In other words, the communications function is, in many ways, now the first line of defense charged with identifying and addressing reputational risks before they escalate into a full-blown crisis.
How risk intelligence can protect brand reputations and mitigate brand crises
Protecting the reputation of your brand is a major challenge that is often complicated by traditional company structures that aren’t designed to handle new and emerging risks from social media.
Brand crises can often be avoided when reputational risks originating or becoming amplified online are quickly identified and acted on. Even when crises occur, swift action can significantly reduce losses or even turn a crisis into an opportunity. The early signals found in digital chatter from actors can provide the additional time needed to mitigate a risk before it presents itself, or better prepare to minimize the damage if the risk becomes a reality.
The Forrester study previously mentioned found that Resolver alerts customers to critical risks and the actors behind them within 30 minutes, provides intelligence to cut through the noise, and enables customers to prevent and lessen the impact of brand crises. The study concluded, for a composite organization representative of interviewed customers, that Resolver delivers a three-year risk-adjusted ROI of 572% and an NPV of $7.2 million.
With an early-warning advantage from real-time detection of reputational risks and high-priority alerts of incidents whenever they happen, communications leaders can be better prepared with a rapid response to avoid an escalation that could damage their brand’s reputation, reduce revenue, or affect operations.
