Enterprise Risk Management Initiative, Poole College of Management, North Carolina State University

Providing Thought Leadership, Education and Training on the Subjects of Enterprise Risk Management

Eliminating Reputation Threats

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In this article in Business Officer magazine, Margo Vanover Porter offers views and opinions of industry professionals on the issue of reputational risk in higher education. As defined in the article, reputation is a key determinant of success for any university. The value that reputation brings to campuses cannot be overlooked or underestimated, and therefore it is something that needs to be cherished and protected. There are two theories on how we should look at reputation threats. One of the theories is that there are four categories of risk: financial, operational, strategic and compliance; and not managing these four risks can result in a reputational risk. The second theory is that reputational risk is a risk category itself.

Considering the number of risks that can arise at a higher education institution, every university should have a comprehensive risk management plan in place in order to properly respond to these threats without sacrificing its reputation. Many universities nowadays are ill informed in this subject matter and lack a proper program that could help them prevent reputation damage. While there are incidences that cannot be avoided, an effective plan could at least prepare institutions for such events. The development and implementation of these programs might be difficult in many aspects, but should be well worth it as time goes by.

Everyone on-board

Industry experts agree that the development of response plans is just one part of the process. The other essential part is testing and practicing the plan within the organization. Every single possibility and scenario needs to be considered. A useful way of performing these tests is picking an actual event, which represents a possible future occurrence. It is very important to notify the general public about the simulation and separate it from a real event. One way to improve this extensive process is observing other organizations and their responses to critical events. These can help organization see specific scenarios and understand the appropriate or inappropriate responses in each of them.

Responding to crises properly

The wrong response immediately after a critical event can cause great harm to an institution’s reputation, and therefore it is important to be prepared for the worst-case scenarios. There are four things that the leaders or communication experts on campuses should never do when providing an immediate response to crises: providing no response; replying “No comment;” offering disorganized, conflicting statements; and issuing a verdict before examining the facts. These approaches can have terrible effects on the organization’s reputation. Instead, the leaders should focus on getting the institution back on track. Hiding relevant facts in a crisis situation can be very harmful to the organization’s reputation, as can be illustrated by many recent scandals facing higher education institutions. Therefore transparency is essential to successful recovery.

Board involvement

Should the board of trustees be involved in risk management? Not directly! Board members should always be up-to date and aware of any possible risk occurrences, but the administration needs to be carrying out the risk management activities. Unless the crisis involves the person responsible, such as the president, the board should always stand behind the plan that is being executed in resolving the situation. The board members should never be answering question from the press or caught off-guard and uninformed about an ongoing crisis.

Conclusion

These are just few recommendations on how to appropriately face crisis situations. Even though the article discusses mostly about higher education institutions, these advices are applicable across industries. The most important point to take away from this article would be effective planning to prevent and avoid as many unexpected events as possible. Being aware of organizational risks and anticipating crises can have a major influence on the security of the organization’s reputation. 

Link: Business Officer

Categorized Under: Enterprise Risk Management Basics / Risk Management Tools and Techniques / Interaction of ERM and Strategic Planning / Risk Management Fundamentals / Risk Management Strategies / 
ERM Enterprise Risk Management Initiative 2014-01-15