Reputational risk is the risk of a negative public image and the impact that it can have on your income. For example, a car dealership that sells defective cars will quickly become known for shady dealings. Angry customers will tell their friends and neighbors to avoid that seller, and they will sell fewer and fewer vehicles unless something is done.
Your business’s reputation is everything. If people smile and sing your praises, you will likely have customers flooding in your doors regularly. If people frown and jump at the opportunity to tell their friends or coworkers about the awful experience they had doing business with you, that’s a significant problem.
With smartphones, social media, and online reviews, people can spread the word (good or bad) about your business in a matter of seconds. You have to work to build a welcoming, trustworthy brand. It’s imperative to understand how fragile your business’s reputation can be. It takes years to build a strong reputation, and it can be torn away in a matter of hours if things go south.
Reputational Risk Management 101
Managing your reputational risk starts at the top, with your business’s leadership team. They must conduct themselves professionally and act as ethical leaders to those below them. A leadership team that treats their employees with disrespect will trickle down to a customer service team that treats customers with disrespect. On the other hand, a company culture of kindness and excellent communication will flow through as well.
Let’s look at an example of how company culture can damage your reputation. A popular online retailer has recently been under fire for overworking and underpaying their employees. Socially conscious purchasing is becoming more and more popular among millennials.
When these stories of employees getting injured and working insane hours without breaks came to light, many people quickly pivoted their holiday shopping plans, deciding to go elsewhere for their gifts this year. This retailer likely cost themselves billions of dollars this past season due to the reputational risk they exposed themselves to by not taking better care of their company culture.
Company culture is not the only way to manage your reputational risk. You also have to be strategic about your customers. Understand what areas of your product or service could lead to customer or employee complaints, and take steps to head this off.
What could lead to a customer complaint at your firm? Going back to our car dealership example, if someone buys a car and it breaks down one week later, they are likely going to have something to say about it. Having a team of mechanics who check over the cars before they go out the door, and a 30-day guarantee on all vehicles is an excellent reputational risk management strategy for car dealerships.
Another essential part of managing your reputational risk is by providing opportunities for
customers to voice their complains and concerns. If someone calls your office, unhappy with their service, but immediately gets met with someone who listens to them, and puts the wheels in motion to resolve the issue, they will be much less likely to take their complaints public.
However, if they get shoved into an automated phone loop where it takes forever to talk to a person and end up feeling like their concerns don’t matter, or their problem can’t be solved, they are left with few options other than making a public complaint.
Building a Positive Reputation
The final piece of managing your reputational risk is the offensive part. Make sure you are working to build a positive reputation, so if something unavoidable occurs, you have an outstanding reputation to back you up.
Ask your customers to leave you reviews on Google, Facebook, or LinkedIn. Collect video testimonials from as many clients as possible and share their stories on your website and social media channels. The more positive experiences you can provide, the happier people will be to leave you reviews, and the stronger your reputation will be.