Managing reputational risk
CFOs are frequently called upon to manage the media’s demands in a crisis – but many of them are woefully ill-equipped to do it effectively.
In a lively workshop at The Economists’ CFO Summit last week, Stephen Carver an MBA lecturer at Cranfield School of Management, shared his advice for finance professionals charged with defending their company’s reputation in a crisis.
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The best defence is to be able to demonstrate you acted reasonab
The problem is that too many senior people are not aware of what risk their organisations are running. Most risk is created by the day-to-day behaviours of people operating within the organisation, which are not usually made visible to senior management. These are also not identified through traditional KPIs, performance measures or auditing, which look at the hard evidence, not at behaviours.
The solution is for organisations to undertake routine assessment of the behaviours happening within their organisation and relate them to the risks they create - reputational, safety, finacial, etc. This can be reported as risk profiles that senior management can use to prioritise and manage the risks caused by these behaviours, as they will then be visible, rather than hidden from them.
Who knows, if they use this visibility before the outcomes happen, they should be able to head off the inevitable and not even have to face the music - or at least have a better defence in that they were doing all they reasonably could to manage these risks, assuming they reacted to the information they had through this type of new knowledge.
We have been using these behavioural assessments for some time to measure risk and they do make a difference.