Managing Reputational Risk Through Compliance
By Bernice Asuquo, Chief Compliance Officer at Nepal Oil and Gas.
So many people know compliance is important in today’s business world but only a few understand that it is critical for business success and it doesn’t just start and end with ticking boxes probably to please regulators and maybe, internal champions. Having said that, it is essential to adopt an organized approach to ensure that the whole system of compliance is kept uncomplicated and easily understandable by the person(s) tasked with certain roles and processes.
With reputational risk (which occurs when a brand loses its value and positive mindshare of the stakeholders which results in a negative opinion that can spread like wild fire) in perspective, compliance can prevent its crystallization and save you a lot of money and effort in damage control of your brand’s reputation.
Several factors give rise to reputational risks that organizations have to face and it goes beyond the traditional risk types that most organizations have come to know as traditional approaches to risk management alone may not have the capacity to address it.
One of the issues that affect reputational risk is that it is usually difficult to quantify because a particular incident can mean different things to different people and their interpretations will be tainted along those lines hence organizations should have a compliance strategy to address it.
Sometimes, a damage to a brand could have been prevented if there was a compliance program that ensured that customers/stakeholders’ pulse are felt all through their interactions with the organization. Information obtained from the compliance program are analyzed timely and customers/stakeholders’ frustrations and negative feedback will be remediated promptly.
Other measures include
Effective Board oversight and proper communication:
The tone at the top is critical to the management of reputational risk and effective corporate governance is incorporated throughout the organization. This will ensure that possible triggers of reputational risks are identified and addressed.
Also, companies should employ the right persons and deploy the right tools to tell their stories with distinctive messages to end users. Process improvements of products and services targeted to benefit the stakeholders should be of paramount concern to the organization. If this is adopted, the focus therefore goes beyond customer satisfaction to customer delight. The attendant benefits of this is huge and can be explored by the company to further consolidate its brand and positive mind share in the end users.
Regulatory compliance and internal processes:
Getting on the wrong side of regulatory agencies within an industry can cause serious damage to a company’s brand and reputation. To address this, effective internal controls over compliance related matters should be implemented and monitored continuously to ensure that nothing slips through the cracks.
New regulations must be incorporated and changes within the business environment must be understood for ease of compliance.
At the heart of all these lies the fact that for the compliance program to be effective in addressing reputational risks, it must have the support of the board and management. Management override of controls meant to offer protection must be discouraged.
It must be encouraged and deviations from the accepted culture should be flagged as soon as it is observed. People within the organization must share the same value and commit to ensure it is not compromised because whatever the organization allows, accept, discourage or enables is imbibed and becomes the culture of the organization even when it differs from what is written on paper. When these values align with the organization’s strategy, great rewards abound.
The tenets of corporate governance must be seen to be upheld by the board if the persons responsible for managing risks arising from reputational concerns within the organization are to succeed in this role.
Reputations are built on integrity which imposes responsibility on everyone. Given that reputations are hard to build but can be destroyed quickly, anything with the capacity to destroy or tarnish it must be addressed swiftly since it may not be completely avoidable
Bernice Asuquo is an astute professional with robust experience spanning accounting, consulting, internal control/audit, risk management, compliance and fraud investigations. She is skilled in outlining risk assessments and discussing potential compliance and corporate governance related issues with management while also providing valuable solutions that addresses the lapses and promote optimum company practices. She is based in Lagos, Nigeria.