It is a university project. Reputation Risk management is often neglected in the risk management frameworks, therefore often neglected in designing corporate strategies. An effort to give cognizance to reputation being at the core of all businesses.
2. Table of Contents
1. Introduction................................................................................................................................4
1.1. Purpose of the report...........................................................................................................4
2. Reputation risk............................................................................................................................5
2.1. Risk analysis ........................................................................................................................5
2.2. Reputation Risk Management...............................................................................................6
2.3. Crisis Management..............................................................................................................7
3. Conclusion..................................................................................................................................9
References.......................................................................................................................................10
3. Executive Summary
“It takes many good deeds to build a good reputation, and only one bad one to lose it.”—
Benjamin Franklin.
Strong positive reputation attracts better people, better investment and provides ease of
conducting business. According to an HBR article 70% to 80% of market value comes from
intangible assets such as brand equity, intellectual capital and goodwill (Reputation and its risk,
n.d.)
We are bringing a new technology for our country backed by Japanese finances, USD 12
Billion of the estimated USD 15 Billion for this project, and technology. Japan International
Cooperation Agency (JICA) and Ministry of Railways (MOR) in their report of July 2015 do not
cover Reputational Risk.
I believe given the size of the project financially and the complexity involved in
maintaining the relations between 2 nations we should have thought about Reputational Risk.
Reputation is the belief or expectation of certain characteristic. With amount involved the
Japanese government will surely be looking this project as a stepping stone with respect to future
involvements. This project will not just affect the governments but will also impact the
reputation of the country in the World banks report of “Best places ranked by ease of doing
business”. Thus, it is necessary to understand the reputational risk and manage them. A response
plan should also be initiate if something does go wrong.
In the report I will touch upon the issues that can arise during and after the project which
will impact the Reputation of the board as well as the fall out will affect the whole country. As
with any risk Reputational Risk also has a negative as well as positive impact. Thus, a positive
Risk would be the reputation of the board, the government and the country as an investor
friendly nation will increase giving rise to better partnership venture in the future. This in turn
will increase the GDP and will have a positive impact on the whole nation. However, negative
risk completely gives the opposite result as cross country investors will be vary of the nations
bad reputation and will not freely invest in the country.
The main risks identified are Direct Risks, Tangential Risks and indirect Risk. These risks
are further divided into sub risks. Direct Risks will include the risks as the direct consequence of
the rail board such as environmental mishandling and mishandling of indigenous population.
Tangential Risk are the risks brought forth by related parties such as political parties, vendors
and issues related to products and customers. Finally, indirect risk are the risks associated with
the actions of employees.
The risk management plan would include manging these risks and preparing a response
plan. Direct Risks can be handled by careful consideration of choices the board will have. These
risks also have a set policy and procedures that are to be followed as a general guideline. Thus, to
manage these risks board must be careful about following these guidelines and procedures.
Tangential Risks Arise from the action or reputation of related party. Political Risk is the biggest
in this section wherein if the government changes and the new government does not think HSR is
the need of the nation it may pull back resource from it. The only way to manage this is to either
get all political parties on board or to directly know the nations pulse whether the majority think
HSR should be implemented or not. Vendor Risks can be handled by careful selection of vendors
who have good reputation in the business. Finally, issues related to products and customers can
be handled in different ways such as regular maintenance and decreasing the gap between
customer expectation and what we sell. Indirect Risks arise from the present and past employees.
4. To manage this a risk culture must be developed in the board where everyone is accountable and
responsible for reputation of the board. Guidelines on expected behaviours should be taught and
followed with a bottom up approach.
Finally, if there is an issue of Reputation One person should be made responsible for
planning and implementing a response. Although it is one person, he will be assisted by whole
organisation in handling an issue.
5. 1. Introduction
1.1. Purpose of the report
The report, Joint Feasibility Study for Mumbai-Ahmedabad High Speed Railway Corridor
Final Report Volume 6 published in July 2015 omits Risk management completely.
This is a new technology for the country in partnership with various private entities at
home as well as abroad. The involvement of number of entities give rise to many kinds of
uncertainty at all levels of implementation of project. One such major risk is Reputational risk.
However, the report has no mention of Reputational Risk. This report tries to identify, assess,
respond, monitor and record events which can impact the reputation of the Indian railways and
thus the Indian government since Railways is wholly owned by the Government of India.
The reputation of board is linked with the reputation of the country because it can impact
future projects not only with government but also with private entities in India. Thus, this can
negatively impact the Indian economy in future by limiting the investment of time, technology
and funds into the country. Furthermore, this can impact the country by creating an environment
of political instability, costing the nation the burden of elections before its due time. The large-
scale implications cannot be undermined and therefore, Reputation Risk should be managed
appropriately.
On the contrary as with every risk, we can expect positive implications such as increased
rate of investment, preferred partnerships and joint venture with Indian companies and increased
sharing of technology. This largely depends on how we handle the current billion-dollar project.
Therefore, creating a Reputational Risk strategy for the project is not only essential but also
critical in my opinion.
6. 2. Reputation risk
Reputation is an expectation of behaviour (RM Magazine, n.d.). The HSR project is
different in terms of its size and complexities. The project will have an impact on various
communities and environment. Also, the partnership between two nations increases the risk on
both sides.
Reputational value, which was earlier not measurable readily, manifests itself in the form
of lower employee cost and turnover, customers tolerance for pricing premiums and other
expenses (RM Magazine, n.d.). Thus, the reputational risk is critical for any organization since a
positive impact can make it more profitable and easier to operate. However, a negative impact
can affect the organization at all functional levels. Thus, it is important for the board to
understand the expectations of various stakeholders, communities and environment which will be
impacted by the project.
A comprehensive plan to manage such risk is more so necessary in todays hyper connected
world, where a small mistake by any party related directly or indirectly can impact the
functioning of the organization.
2.1. Risk analysis
The most important thing in risk management is to define the risk. Risk Definition for the
project can be defined as: it is the likelihood of an event which can have an impact positive or
negative and can alter people’s opinion and belief about the board. (Reputation Institute, n.d.)
1. Direct risk: determined as the consequence of the board’s action or decisions.
1.1. Environmental mishandling: the generation of Millenials are very sensitive to
environmental causes. As stated in the July 2015 report the HSR project will affect the
environment by deforestation, noise due to construction activities and operating HSR, changes
in underground water levels, air pollution, large scale migration (influx) and soil pollution
among others. These issues are very important from the point of view of the Millenials. This
generation will be the one who will use the HSR and thus any mishandling can cause a damage
to the reputation of the board and can impact the long-term success.
1.2. Mishandling of indigenous population: The route of the planned HSR has many
forests, inhabited by some indigenous communities. Their life will be disrupted by the
construction and operation of HSR. These communities if not managed correctly can turn
hostile and may not allow the HSR activities to continue.
2. Tangential risks: determined as a risk arising from the actions of various partners
2.1. Political risks: the projects as big as HSR are sometimes viewed as a “pet” project
of a political party. In a democracy any party can be elected, which increases the risk of other
party not continuing the project or not giving enough commitment for the project to complete
on time. The project is also financed by a country whose leader has cordial relation with
current Indian Leadership. Any change in this ratio will impact the whole project.
2.2. Reputation of vendors and suppliers: According to a deloitte report authored by
Laura Toni, third party relationships are emerging areas of risk with organization being held
7. accountable for the actions of their vendors and suppliers (Laura Toni, 2014). In the recent
time we have seen the fallout on companies because of fickle actions or statement by their
vendors or their vendors representative. Example of apple is prudent where news came where
the employers of the factory complained about harsh conditions (Bloomberg Technology,
2018).
2.3. Issues related to products and customers: The product that we are making is a
High-speed transportation. This is a first of its kind in our nation. There may be infrastructural
risks which will hamper the high-speed movement. If the board fails to provide what is
expected will dampen the reputation.
3. Indirect risks: risk arising due to actions of employees. Employees know about the
company better than the outsiders. If an employee speaks discouraging facts about the
project people tend to believe it more than the justifications provided. In todays
hyperconnected world any adverse feedback can become viral and pose a threat to the
project as well as to the projects reputation as well as reputation of parties involved.
2.2. Reputation Risk Management
First step to manage reputation risk is to assess where we stand currently. We must analyse
what is it that people and stakeholders expect from us. Continuous monitoring of changing
beliefs and expectations is also essential.
Type of Risk Sub Risk Management Strategy
Direct Risk
Environmental Mishandling
Strictly Follow the environmental Guidelines
available.
Manage the destruction by creating an opposite
action. For example, deforestation should be
matched by planting of trees.
Use appropriate safety equipment to handle
noise and vibrations during and after the project.
Publish and communicate to the general public
about the initiatives.
Mishandling of indigenous
Population
Communicate with them
Know what they want and expect.
Try to create a win-win situation.
As per the norms get the agreement from the
majority
8. Corruption
Ensure transparent procedures.
Leverage Technology for masking the applicant
from the selectors.
Do not make public the names of official who
will sign the contracts.
Tangential
Risk
Political
Get all the political parties on board
Organize a public referendum with regards to
the project. This will be a first of its kind in
India but will assure the smooth flow of the
project regardless of which party is in power.
Reputation of Vendors and
Suppliers
Strict control measures for selecting vendors and
suppliers.
Transparency in their selection.
Strict agreement, protocols and guidelines of the
expected standards and behaviours.
Issues Related to Products and
Customers
Benchmark the product and service quality.
Extensive employee training to handle customer
grievances with empathy and concern
Indirect Risk Actions of Employees
Creating a positive Risk culture across the
organisation.
Training.
Setting and communicating standards of
behaviour in public.
Rewarding correct behaviour. Identify and
retrain incorrect behaviour.
Increase accountability for actions.
For past employees make a Non-Disclosure
Agreement.
Apart from the above Management strategies, Communication is one of the most important
strategies. Communicating with the stake holder, employers and the general society is the most
important thing. The flow of information should be both ways. With social media emerging as
one of the greatest tools to take advantage, one should actively communicate to its stake holder
using these.
2.3. Crisis Management
Even after most careful consideration and implementation there can always be mistakes
which can snowball into a crisis. For such incidents we should have in place a crisis management
and response team.
As per an article authored by Bruce Condit, VP Allegiance Capital published on
www.inc.com there are 7 steps to crisis management. (Condit, n.d.)
a. Have a plan: define key objective of the crisis management. Ensure the key audiences are
kept informed.
b. Spokesperson: identify a spokesperson who will communicate and answer all questions.
This is especially important if the crisis puts threat to human lives (employee or public).
9. c. Be honest and open: we live in the times of trust issues. Therefore, it becomes essential to
be honest and open about the mistake that has happened. Being open and transparent
helps control rumours and thus decrease the chances of a media frenzy.
d. Keep employees informed: informed employees reduce the risk of internal rumour and
fallout. Uninformed employee may fall into the trap and post false reports online, which
would bring another crisis to the fore.
e. Communication to suppliers and customers: they are the key stake holders. Any crisis
information should be given to them by the organisation and not the news agencies. This
helps in building positive trust relations. Updating them at regular intervals should also
be done.
f. Update early and often: better to update the masses more often than allowing rumours to
spread. Todays hyperconnected world it should be considered making a summary report
every 24 hours and communicating it to all.
g. Social Media: The most powerful tool. Efficient use of social media should be planned.
Efficient team to monitor, post and respond to online posts should be made.
10. 3. Conclusion
As per Dr. Andrea Bonime-Blanc Reputation Risk cuts across all other risks. It attaches
and amplifies the effect of other risks (Bonime-Blanc, n.d.). thus, in todays hyperconnected
world with lots of trust issues in the general masses effective management of Reputation Risk is
essential.
Although, managing reputational risk is a difficult task, the simplest way to tackle it is to
be ethical in actions. This simple message should be propagated and made part of the
organisation culture and should be reiterated and reflected in company’s policies, procedures and
decision making.