In their August 2020 report, Protecting Intangible Assets: Preparing for a new reality, Lloyd’s of London and KPMG report that intangible assets make up 80–85% of a company’s market value, and your corporate brand and reputation is a large part of that. Globally, the total value of corporate reputation is estimated to exceed $16 trillion, according to AMO Strategic Advisors, so companies need to protect and manage this asset. But how do you manage something that is intangible?

“What gets measured gets managed” is a famous business quote from business strategy guru Peter Drucker. And this is also true when it comes to corporate reputation. Most companies will say they are managing their reputation. But only a few have a structure in place for measuring the reputation risks and opportunities in a way that enables leaders to protect the company’s value.

And so, companies are caught in a perfect storm. The value of a company is more driven by intangible value than ever before. This means that your corporate brand, your reputation, and the intangible assets you have are directly tied to the financial value of your stock. So the perception people have of you drives the stock price, and your sales.

At the same time, social media has increased transparency, making even small issues in remote parts of the world potential crisis situations at the corporate level. Issues that before would not make it outside of the local market will now find their way to all your customers in minutes—potentially damaging how those people see you—whether true or not. People now have the power to impact the success or failure of companies like never before with a single post online. All of this means, that having a proactive strategy for Reputation, ESG, Brand and Purpose are new demands, which every company needs to deliver on to be successful—and company executives know this. But they are missing the tools to manage these new risks. And since this value is intangible, it’s hard to manage. So what do you do? The first step is to make it tangible so you can measure it. And from there, get insights to guide your actions.

Protecting the value of your reputation

Various studies, including ones by Airmic and RIMS, point to Reputational Risk as a top-three concern and threat to business value, yet the tools and processes used by companies are primitive and inadequate for the current fast-paced environment, the high stakes, and the new expectations.

There are two sides to Reputation Risk Management: The downside risk protection and the upside risk potential. Both are critical. To succeed, companies need to have one integrated framework used on both risk protection and upside leverage. And the teams from risk and communication need to work together.

Risk protection

Reputational Risk should be integrated into the Enterprise Risk Management framework and process. This means that reputational risks should be defined, assessed, and valued, just like any other risks.

The problem most companies are facing in doing this is that they do not have a measure for the potential cost to the business from a reputation crisis. Some companies are using a measure of media exposure to predict the impact. Others are using potential impact on Net Promoter Score. But none of these measures are accurate and predictive enough to provide the actionable insights needed to define which issues have to be mitigated.

The impact on reputation from an issue can be measured and quantified using the RepTrak® algorithm. The RepTrak® Risk process follows the same steps as a standard Enterprise Risk Management process. And it adds quantitative data to the business impact from the reputation risks. By assessing the loss in reputation and willingness to support the company, companies can put a number to the potential impact from each issue. And this way, the true loss for the company can be assessed. This enables the company to identify the severity of each issue before it happens and take the necessary actions to prevent them from happening.

Risk upside 

There is a potential upside to every risk. Companies that know what drives their reputation with key stakeholders know what to say and do to win support. And this enables the communications team to improve their return on investment by focusing on what matters most to customers, employees, regulators, and investors.

Using the RepTrak Risk framework, companies will know exactly which of the seven Drivers of reputation will be hurt by a specific issue. They will know how to mitigate the impact through specific communication, and they will be able to turn the risk into an opportunity.

This way, the reputational risk process can be integrated into the Enterprise Risk Management process, as well as the crisis management structure. Not only will this give more visibility into the prioritization of specific risks, it will allow the company to integrate the strategic, the operational, and the tactical level of risk management.

With RepTrak, the risk team and the communications team can work together to both prevent and handle the issues in a much more proactive and efficient way.

And with a clear reputation measure, companies are now ready to protect the intangible asset of reputation.

Making intangible assets tangible

With the RepTrak Risk approach, you can measure and manage your reputation risks. You can quantify your reputation. You can identify which reputation issues will hurt your business the most. And you can prepare specific crisis management processes to tackle the impact even before it happens.

The road map is clear and the tools are available. Now, the only question is: Are you ready to leverage this new way of working with intangible assets?