(216) 609-3940
SandRun Risk
  • Home
  • What We Do
    • Risk Management
    • Insurance Claims
    • Insurance Archaeology
  • Blog
  • About
    • Team
    • Our Company
    • Articles
  • Contact

Book Review: Rethinking Reputational Risk

10/27/2017

0 Comments

 
Picture
What is far and away the most important asset of any organization? Many today will agree it is its reputation. ​Read a review on Rethinking Reputational Risk  by our guest columnist by Felix Kloman.
PictureBook review by Felix Kloman.
And a reputation is composed of the emotions and reactions not only of managers, employees, and customer, but also of a wide range of stakeholders, including suppliers, lenders, regulators, communities in which it has operations and even competitors and the world at large!
 
Fitzsimons and Atkins, two UK-based insurance and management consultants explore the frightening inability of most organizations to pay serious attention to their reputations. “A good reputation is valuable”, they write. I’d go much farther: it is essential, True, how does one “measure” a reputation, since it is composed of the mental images of both groups and individuals, changing every moment? Can you ever assign a financial value? But this exploration is worth a serious read. First, it acknowledges the importance of reputation. Second, it places stress on understanding behavioral economics, including its biases and heuristics. Third, it emphasizes the primary role of a Chief Risk officer as a ”listener” rather than an advocate.
 
The chapters are brief and punchy, concluding with thoughtful “questions to mull.” The authors cite numerous behavioral writers, including Ariely, Thaler, Sunstein, Kahneman, Tversky, Gigerenzer, and Tetlock & Gardner (whose Superforecasting was assigned reading for this group!). The middle section includes seven “case studies on BP (Texas City and Deepwater Horizon), Tesco, AIG, EADS Airbus A-380, Barclays Bank (LIBOR), VW, and Stafford Hospital. I wish they had dissected Wells Fargo, a continuing disaster! But each dissects failure: they offer no examples of successful reputation enhancement!
 
But the dominant theme is negative: avoid situations that can erode reputation. The authors define reputational risk as “the risk of failure to fulfill expectations of your stakeholders in terms of performance and behavior.” This attitude, of course, dominates “risk management thinking” today: look only at the downside, a result, perhaps, of the completely negative use of the word “risk”.
 
They also acknowledge “risk management isn’t new. It’s been an evolutionary force beyond human memory”, but they over-focus on its largely English insurance history from the later 1970s. Strangely, they make no mention whatsoever of the Society for Risk Analysis, COSO, or all the permutations of ISO. In addition, while emphasizing the importance of “stakeholders” in creating and maintaining reputation, they offer no ideas for how we ought to communicate with their wide range. Shouldn’t organizations create and maintain continuous two-way dialogues with all stakeholder groups? With today’s social media, this is now a practical idea.
 
That immortal comment from Cool Hand Luke (1967) applies: “What we’ve got here is a failure to communicate!”
 
Unfortunately, sales pitches inevitably creep into the text. The authors are owners of a UK management consultancy titled Reputability LLP. Every so often they encourage retaining an “independent observer.” But not “remuneration consultants” whose “independence and incentives should be studied carefully before reliance is put on what they advise.”
 
But a quote from Warren Buffett sums up this entire book: “We can afford to lose money – even a lot of money. But we can’t afford to lose reputation – even a shred of reputation. We must continue to measure every act against not only what is legal but also what we would be happy to have written about on the front page of a national newspaper in an article written by an unfriendly but intelligent reporter.”
 
Worth a serious read!

​Felix Kloman
Email: fkloman@aol.com

CLICK HERE TO PURCHASE ON AMAZON
0 Comments



Leave a Reply.

    Authors

    Lori Siwik and Mark Siwik are the founders of SandRun Risk.  They apply the principles of vertical leadership and lean six sigma to the discipline of risk management.  From time to time they share their blog with guest authors who write about important risk management principles.

    Categories

    All
    Insurance Claims
    Mergers And Acquisitions
    Risk Management

    Archives

    May 2022
    December 2021
    September 2021
    August 2021
    July 2021
    June 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    June 2017
    May 2017
    March 2017
    December 2016
    November 2016
    October 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    June 2015
    May 2015
    April 2015
    March 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    May 2014
    April 2014
    March 2014

    Categories

    All
    Insurance Claims
    Mergers And Acquisitions
    Risk Management

    RSS Feed

What We Do.

Risk Management
Insurance Claims
Insurance Archaeology

Blog.

About.

Team
Our Company
Articles

Contact.

Legal.

Privacy
Terms of Use
 
Copyright ©2014 | 4199 Kinross Lakes Parkway, Ste. 275 Richfield, Ohio 44286 | 216-609-3940 | info@sandrunrisk.com