Question

7. Reputation risk is a top strategic business risk affecting ethics and integrity, security, product and services. A company’s reputation is affected by its business decisions and

performances across a wide range of areas. Based on a study by one of the “Big Four” global accounting firms on reputation risk, what are those wide ranging areas they refer to,

explain all eight of them.                    

8. A single big event or a combination of small events can trigger a major crisis. Set out the five best practice elements the accounting firm Deloitte considers to be how to approach a

crisis management situation?                                                                                  

Answer 1

a)

The areas of business affecting the reputation of the organization are:

1. Quality: Consistency of quality is extremely important for Organizations. Product failures can have huge impact on the firm's reputation. For example Nestle faced the crisis of lead presence in Maggi beyond acceptable limits in india.It had to destroy thousands of tons of stock to assure customers and go through multiple checks by regulatory bodies before resuming production.

2.Security: Data security is extremely important for financial and technology companies. Facebook suffered a massive outrage due to data breach in its sister concern.

3.Corporate social responsibility : Actively promoting social responsibility programs helps create a reputation of a great company.

4. Ethics and Integrity: Firms like TATA's enjoy great reputation due to not pandering to ruling class for contracts.

5.Crisis response: How a company behaves during crisis represents the true nature of its core values

6.Safety: Companies practicing the best Safety, health and Environment enjoy great reputation

7.Innovation: Innovating companies are seen as creating more value and enjoy good reputation.

8 Financial Performance: the integrity of the numbers is crucial to enjoy good reputation.

b)The five best practice elements the accounting firm Deloitte considers to be how to approach a

crisis management situation are:

a) Be ready proactively : Organize and rehearse crisis situations and plan before a crisis actually hits.

b) Take decisions carefully as every decision has major implication during a crisis.

c) Response should be steady and quick . delay in decisions can be very costly.

d) Look for opportunity in crisis. For example when Nestle faced the crisis of lead presence in Maggi beyond acceptable limits, It revamped its quality department and made it the best in class in India and put quality norms stricter than set by the regulatory bodies.

e) stay alert for after effects Long after crisis is gone as legal implications and return to normalcy will take time.