How to Tackle Reputational Risk with Risk Taxonomy
Steven Minsky | July 11, 2013
Fifteen of the world’s top risk managers met recently at the 2013 RIMS Risk Summit. When the topic of reputational risk arose, the group struggled to develop a concrete value proposition, but unanimously agreed that no ERM assessment that failed to tackle reputation risk would be deemed complete by leadership.
Their recognition calls attention to one of the biggest hurdles confronted by risk managers in all industries when faced with high level risks deemed critical by the board or executive leadership. How does a risk manager take a strategic goal, such as reputation enhancement, being the “provider of choice,” or exhibiting responsible citizenship, and pin it down to measurable and actionable initiatives?
The key is installing a risk taxonomy that is dynamic enough to map the front line risks faced everyday with the strategic priorities of leadership.
Let’s take, for example, the recent trend of Fortune 500 companies across the globe to integrate Corporate Social Responsibility (CSR) as a core business competency. Initiated by leadership, the ultimate ability for organizations to demonstrate good citizenship falls to front line managers across the enterprise. As a risk manager, how valuable would it be to drill down into your risk library, identify the risks associated with CSR, and then aggregate and report on the risks to that strategic goal?
This is just one example of how establishing an ERM Process can turn abstract goals into measurable achievements. The same concept can be applied to reputational risk, financial objectives, safety concerns, and countless other management level objectives. With the right tools, Risk Managers are able align their activities with their organization’s unique risk appetite statement, allowing them more time to identify gaps that put their company in jeopardy.