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Reputational Risk

Educational Institutions and Reputational Risk

The Australian newspaper recently reported that the Indian student market is showing early signs of collapse, with the recruitment body IDP Education Australia reporting an 80 per cent fall in appointments by students at its 14 Indian offices. A severe fall in applications from Indian students for training diplomas and certificates would lead to widespread closures in the vocational sector of the type seen in Sydney and Melbourne over the past fortnight. IDP chief executive Tony Pollock yesterday conceded that a "head-count" survey conducted late last month had revealed an 80 per cent decline in visits from prospective students to the organisation's Indian offices. The Indian market is the sector's biggest growth area but is under threat amid the fall-out from a spate of assaults on Indian students and revelations that students are being exploited by unscrupulous private colleges and fraudulent agents. These recent revelations demonstrate the implications of reputational risks that can affect educational institutions. Although some areas cannot be mitigated; an appropriate Risk Management approach to their reputational risk can assist a University or College in continuing to attract and retain overseas students.

NRL Sexual Misconduct Claims – Another example of Reputation Risk in Sport

More allegations of serious sexual misconduct have once again the potential to seriously damage the NRL's reputation. In a difficult economic environment, allegations of group sex and sexual assault, as made in last night's ABC TV program, Four Corners, may have serious implications for the game's brand and de-tract from the value proposition offered to sponsors of the sport.  Managing such crisis and events that seriously threaten one's reputation is always difficult. Reputation is usually gained over time but can be dashed very quickly.  Great care will now be needed to minimize the consequential loss resulting from the crisis.  Reputational risk management is an area growing in significance in the sport, venues and events industries.  When crisis management is poorly executed it can cripple an organization and its goodwill. An organisation's reputation is arguably its most valuable asset and needs careful nurturing and effective risk management.

Brand, Reputation and Relationship Risk

Ask any CEO of a major venue, event or sport; their organisation's reputation, its brands and its relationships are some of their most important assets. A loss of these can spell disaster for the business, particularly in a world of shrinking revenue's, participation rates and market share. So what are these issues and why are they important?A brand is a collection of associations connected with a service, entity or person. The brand is sometimes described by marketers as the personality traits behind a product or service. If we were talking about the personalities of a brand these traits might include:

  • Their name, look, hairstyle and clothes, (i.e. a venue's name, logo and building presentation); and
  • Their behaviours like a sense of humour and simple approach, (i.e. a sport that is fun and simple to use)

A reputation is based upon people's experience in using the brand. (i.e. whether the sport or venue is safe to use).

Our relationships are critical; with our customers who buy tickets, with our suppliers who are reliable, with the media who support us, and our industry who respects us.

Anything that threatens our brand, reputation or relationships is a risk to the business and should be taken seriously. A risk-based approach to image and reputational risk to manage these threats is important to identify and prioritise these threats and direct resources toward limiting the chance of the threat or its impact. This requires the risk management discipline to be applied to marketing and overseen by the organisation's Executive to understand the risks, and use tools like Enterprise-wide risk management and crisis management planning to help.

Reputational Risk – Important Considerations Linked to Safety

For many safety professionals, safety risk is defined as the level of injury or fatality resulting from a hazardous occurrence. Yet if you asked the public to define safety risk, they may see things quite differently. The safety professionals definition fails to take into account all the factors that invoke an emotional response such as fear, fright or anger which collectively make up factors contributing to a more significant reputational risk through ‘public outrage.’ In a reputational sense some practitioners argue that the following definition exists: Risk = Hazard + Outrage

The irony is that most safety professionals pay little attention to the outrage when considering risk, and the public often pays less attention to the actual hazard. Bird flu was such an example where the fear created amongst the community, far outweighed the reality of hazard.

Experts in risk perception have identified the following variables as some of the contributing factors to this outrage phenomena:

  • Control - The level of control one has over the hazard – e.g. driving the car feels far safer rather than being a passenger
  • Fairness - Where there is a perceived level of unfairness in the treatment of one group over another
  • Morality – Where there are some risks which are not only unacceptable but perceived as evil – e.g. child molestation
  • Trust – Where we feel more empowered and believe as true information about a hazard when it comes from a reputable source

Concerns for these factors are important when making decisions regarding safety hazards and the choices available between alternatives in the management of risk.

Considerations such as these should be at the forefront of all managers and Executives in high profile public and private organisations, major event organisers and large venue operators in the way they communicate risk with their external stakeholder. Failure to do so can be exceptionally damaging to the brand and the bottom line.