How to fix reputational loss

How to fix reputational loss: a corporate governance education guide on acting fast to address a severe corporate risk.

Rebuilding a company’s reputation is often extremely difficult. Failure to meet market/stakeholder expectations, breach of confidentiality, and negative employee reviews can all contribute to an organisation’s reputational loss. 

A poor organisational reputation leads to a wide range of negative consequences in the long term, such as the lack of investor trust and increased turnover. Research shows that a company with 10,000 employees could spend $7.6 million to counter the negative sentiment. As such, it is necessary to restore the public perception of your company since it affects productivity, performance, and revenue. 

Reputational damage could directly impact shareholder interest, a board’s core responsibility. Board members and directors must implement a systematic and proactive approach to managing reputational risks. We highlight the critical roles of board members in rebuilding a company’s reputation and strengthening it for the long term.

It is integral for your organisational board to work closely with senior management when developing proactive reputation management. Through these collaborations, board members can consistently monitor stakeholder sentiments and quickly deploy crisis mitigation initiatives that prevent escalation. 

Board members should prioritise safeguarding corporate reputation by encouraging open discussions with senior management (i.e., C-suites). Robust working relationships between the board and management enable a comprehensive analysis of stakeholder behaviour and concerns. 

These joint efforts can help boards interpret reputational risks concerning specific operational incidents to discover relevant solutions. Operational information provided by senior management can guide the board in implementing practical reputational recovery strategies. These situational strategies address potential consequences, including subsequent risk appetites when moving onward from a reputational crisis. 

A contextual approach can also help boards fine-tune and expedite reputational recovery by identifying the critical interests of stakeholders and parties that directly affect organisational success. Essentially, boards can provide the much-needed industry expertise and leadership experience in supporting management. Board-driven support could prevent costly errors and oversights on the road toward rebuilding corporate image.

One critical role of corporate boards in reputational recovery initiatives involves assembling an effective internal investigation team that identifies the underlying cause of a crisis. These teams are vital in suspected corporate wrongdoing, such as accounting fraud, tax evasion, and insider trading. 

A board can also function as an independent party with the authority to engage the assistance of external legal and investigation teams. This status – fuelled by the presence of non-executive directors – enables boards to work conveniently with top executives and business leaders to access confidential documents and processes without risking conflicts of interest.

Aside from putting together an investigation team, boards can provide the necessary resources for driving investigative work. These resources may include technological tools, hiring specialised professionals, and the budget needed for in-depth investigations. Funding a combination of these solutions can accelerate follow-up action for improved results. 

Corporate boards should also record and monitor detailed reports in their investigative work to identify learning points in reported incidents. Detailed and visually optimised reports could guide senior management in drafting the most effective policies and improving accountability throughout the company.

Organisational boards should support leaders with the appropriate tools and expertise to manage and optimise the company’s reputation. For instance, board directors and members could participate in business intelligence meetings with top management and prioritise reputational risk guardrails. 

Board members can propose efficient reputational strategies based on the results of regular operational assessments and safeguard against anticipated risks. Boards can fine-tune reputational reviews and improvements with a systematic approach, which may include:

Boards can establish a designated channel or process that enables leaders to update board members on stakeholder concerns and reputational challenges. Clear communication pathways can help streamline reputational reviews and improvements.

A reliable policy highlights the steps organisations must take during a negative PR event. These official documents should clearly outline important processes for expediting the crisis mitigation and reputational recovery process. Primary components in your policy may include authorised roles and their duties and internal communication protocols.

Boards can engage company stakeholders when formulating strategies and boosting the outcome of the board agenda. These measures align stakeholder interests with organisational goals to prevent future reputational damage.

Boards should focus on creating a resilient reputational strategy that will hold out in the long term and across volatile situations. This may include constantly engaging management to ensure that they make the right decisions at the right time based on the context of the situation. 

Developing flexible reputational strategies based on thorough risk assessments and opportunities is advantageous. These strategies often require a follow-up allocation of funds to safeguard corporate reputation in various areas.

Board members and directors need to understand the widespread effect of reputation risks, which spread across cybersecurity concerns and work culture. As such, decision-makers should always consider the business problem in its entirety when formulating a long-term reputational strategy. In this regard, boards need to work out the most effective multi-prong corporate strategy with top management by prioritising reputation alongside critical organisational elements like culture, innovation, and leadership. 

Discover how to improve your company’s reputation with a university-approved diploma in corporate governance.