Companies Can Lose Significant Value When Disaster Strikes
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Companies Can Lose Significant Value When Disaster Strikes

Events such as the Japan tsunami and earthquake as well as various accounting scandals, have caused many organizations to lose value.

Holmes Report

Events such as the Japan tsunami and earthquake as well as various accounting scandals, have caused many organizations to lose value, according to the Aon-sponsored Reputation Review 2012 report recently issued by Oxford Metrica, an independent analytics and advisory firm, which says the effects of large-scale crises, whether manmade or driven by external forces, have an impact on corporate reputation and financial performance.

Seven of 10 companies measured in the report that were impacted by disasters in 2011 lost more than one-third of their value and two companies lost almost 90 percent.

"While the principles of reputation recovery are made more vivid by crisis, they apply equally to lesser events that can still damage a company's reputation," says Randy Nornes, executive vice president with Aon Risk Solutions. "Last year's research revealed that 80 percent of firms will lose 20 percent of their value once every five years due to reputational issues.

“Any company, no matter its size, can mitigate the risks of an event by taking a positive and thoughtful approach to crisis management. Supply chain risk is often the catalyst for crises, so this can be a great place to start the process."

Best practices companies should perform to ensure an effective reputation strategy is in place include:
• Evaluate reputation equity to benchmark the effectiveness of your current reputation strategy
• Analyze the drivers of reputation risks to allocate your financial resources more effectively
• Develop a reputation recovery strategy to generate the best chance of recovery in the event of a crisis
• Monitor reputation equity to provide senior management with crucial and timely feedback, enabling confident decision-making and rapid responses to emerging risks

"Reputation event triggers are often outside of an organization's control, so having the right response is critical,” says Nornes. “In an age of 24-hour news cycles and instantaneous social media, the response must be swift and on point. Planning for crises, understanding individual roles and responsibilities as well as developing a road map are key to protecting a brand."
 

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