Management challenge

Rethinking reputational risk

Book review by Andy Cowe - Rethinking Reputational Risk, Anthony Fitzsimmons & Derek Atkins

Kogan Page

This book develops the case for treating reputational risk as distinct category of risk that needs to be addressed by organisations before a crisis occurs.  It is defined as “the risk of failure to fulfil the expectations of your stakeholders in terms of performance and behaviour.”  The authors argue that reputational risk can destroy not only the financial value of a firm, but also the standing of the directors, senior managers and even other stakeholders.  Reputational risk may be reflected in share prices, but its root causes lie in the behaviours of individuals and the culture and structure of organisations.  It is a thoroughly researched work, presented in a highly readable way, illustrated with many examples of well publicised corporate disasters. 

The novel insight that this book offers comes from the way in which the authors combine their own practical experience and research with concepts from several disciplines in a coherent and creative way.  It draws on the behavioural sciences, decision making theory, models of organisational culture and “traditional” risk management techniques.  Part One establishes the theoretical underpinning.  Part Two comprises a series of case studies, mostly occurring within the last decade and including the most recent debacle of Volkswagen exhaust emission results violations.  Part Three draws together the principles and lessons from recent crises into a series of recommendations for setting up and operating a reputational risk management system.  While the recommendations are mainly geared towards large commercial businesses, the authors advocate that the same principles are equally important within smaller, public sector and not-for profit organisation.

The topical nature of the subject matter and the quality of the examples and references combine to make this a challenging and valuable addition to a director’s reading list.  The “Questions to Mull” section at the end of each chapter will help managers to apply the lessons of the book to their own experience.  Masters’ business students will also find it relevant and interesting.

Rating: 5 star, a must read.

Relevant; based on sound research and evidence; immediately applicable in organisations; easy to read. 

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