As business owners, we have to deal with events as they occur. Sometimes we can foresee something happening and mitigate our exposure to them, but sometimes we cannot. Often, we simply do not have the capital to avoid certain issues.
Then there is the other side of the problem; once we think that we have handled it, the business takes another hit. We get a negative review in the form of social media. The feeling is that our customer just kicked us while we were down.
When I created the 54 page business plan for Simplicity, I spent a lot of my time on the threat part of the analysis. My self-doubt made me extra cautious (I was scared) about my environment, the business, [and my money] to the point that all I could think about were the "what if's," the risks.
I was confident that I could start this business. I did go to school for business, but no matter how many classes in project management, risk management and operations management I took, not one professor mentioned reputational management. They should have warned me about the consequences; the hit to my reputation.
For ninety thousand dollars in tuition costs they should have covered more education (I may ask for some money back). In many cases, my (theoretical) business education is a luxury that many cannot afford and put simply, there are things you just have to learn on your own.
Reputation risk management is the "what now" after "what if" actually occurs. But how could they teach you something that many don't really get themselves? Business is a science. Business is quantifiable. So how can we quantify the hit to our reputation? Can we really put a number, or a dollar amount to it? The answer: YES YOU CAN.
If you have a POS system, run reports! Check how much you made today or this month last year and compare. If you do not have a POS system, you can compare your deposits for the same time last year. Check your bank statements, cash flow analysis (many banks can do this for your from their online sites); you can check your insights on social media. There are numbers to help you quantify the idea of your reputation.
The image of our business is all many of us have; it is our life's work, it is our reach, our marketing plan, our advertising source. Exposure to reputational risk is what happens after we thought we managed the crisis; how could we have predicted that it would lead to lost revenues and possibly the slow death of our business (Reputational Risk. 2014)?
In recent news, #myNYPD was an #EpicFail. NYPD didn't foresee that posting photos of on-duty police officers could have a negative backlash. Now, they need to figure out how much this will cost them in addition to the payments they may have to make to PR and Risk Management consultants. On the other hand, Chase Bank "justified" the ridiculous closure of bank accounts with reputational risk management. Apparently, there is a moral code to banking with Chase.
Apparently, reputational risk it is on the rise (Strategic Risk Global. 2014). Big companies have to deal with is, so we definitely have to make sure that we get in front of it and decrease our exposure to it. To get in front of it, we have to confront our common frenemy, Social Media. For the most part, the biggest small business issue is service. I have experienced that confronting the negative reviews by reaching out to the customer, inviting them back, and/or offering them something of value can really help change their perception of your business, thus your reputation.
In the end, represent your reputation, rep your rep and you will see that things can be brighter for you (and your pockets).
Reputational Risk. 2014. Retrieved from https://www.investopedia.com/terms/r/reputational-risk.asp
Strategic Risk Global. 2014. Reputational risk report, April 2014. Retrieved from https://www.fmglobal-touchpoints.co.uk/wp-content/uploads/2014/04/UGC_Reputation-Risk_FINAL_08.04.pdf