South African companies ignore reputation risk management

There is a poor culture of good governance in South Africa. Even with the global proliferation of compliance legislation, adherence to good governance practices among South African corporations has not been proactive and voluntary, but a reaction to legal and environmental pressures.

That is the opinion of Amir Lubashevsky, director of Magix Integration, who adds: "Business generally does what it has to do and no more when it comes to compliance issues, because executives see little, if any return on the not insignificant investments corporate governance requires."

This approach does organisations and their shareholders no favours. Lubashevsky explains that good governance is not simply something that has to be done, but can deliver real value to shareholders.

"Managing your reputation is an integral part of corporate governance. Doing it well not only delivers value in terms of gaining a respected brand, but will also positively impact the bottom line."

Ineffective reputation management, for example, can see a company's brand destroyed almost overnight. While this may not lead to an immediate loss of existing customers, it will affect shareholders when the company is unable to sustain its new business growth because it no longer has a brand people want to be associated with.

"Shareholders invest to make money," Lubashevsky continues. "Good reputation risk management is one factor that will assist business in its quest to increase its revenue per client as well as find new clients. The reality is that in a globalised market there is always a competitor with a good brand waiting to take business away from you."

Lubashevsky suggests five steps to enhance reputation risk management.

1. Roll-out a corporate vulnerability audit to identify where the company's reputation is at risk from internal and external factors.

2. Formulate a corporate reputation strategy. The strategy needs to be all-encompassing in order to insulate and protect the company, its directors and staff and their activities. There are two key factors to this step:

* Setting all the rules, policies, processes and regulations that will govern and guide employees when dealing internally and externally; and
* The implementation of a reputation early warning system that identifies key threats and allows the board to take immediate, mitigating action.

3. Implementation. Implement the strategy and ensure staff is fully aware of their role in protecting the reputation of the company.

4. Board accountability. The board is accountable for the actions of the company's staff. It must, therefore, also be responsible for overseeing the effective implementation of the reputation risk management strategy.

5. Consistent monitoring, evaluation and reporting. A core component of reputation risk management is the consistent monitoring, evaluation and reporting on all activities that could threaten the reputation of the company. Constant monitoring is crucial from a governance perspective.

Taking care of one's reputation is not a cosmetic exercise. "Losing your reputation can have a dramatic impact on revenue and profit," concludes Lubashevsky, "and in extreme cases, can even result in losing the business."