Menu Close

Five reputational risks and how to plan for them


You can’t avoid scandal, but you can prepare for it, writes Jack Torrence for Management Today.  

From data breaches to financial scandals and marketing mistakes to losing your CEO, here’s how to plan for five of the most serious reputational risks to your business:

1) Data breach. In September 2015, a London HIV clinic was fined £180,000 after human error caused an email to be sent with more than 700 patient identities.

Chances are your company possesses data covered by the Data Protection Act – whether that’s payment details, client emails, or more personal information. A data breach will be costly.

Invest in proper training for your staff to ensure they know how to handle data properly and understand the importance of privacy. And keep an eye on new rules and regulations that affect how you handle your data.

2) HR mistakes. PwC came under fire when one of its London receptionists, employed by an agency, was sent home for refusing to wear high heels at work. PwC attracted widespread criticism surrounding the dismissal and were quick to distance themselves from the employment agency’s policy.

Ensure your company and any agencies you use adhere to reasonable standards. Review your hiring process to make sure it is free of discrimination.

HR training sessions may not be popular, but they are necessary. Inappropriate interview questions or discriminatory hiring policy reflects badly on your business.

3) Marketing mistakes. Offensive campaigns like gambling chain Paddy Power’s “money back if he walks” advert, run alongside the Oscar Pistorius trial, may generate buzz, but this kind of publicity would not suit every business.

Steer clear of scandal by double checking any promotions that could be controversial. Make sure you trust those who have access to any social media accounts.

4) Financial scandal. Supermarket Tesco’s reputation suffered when a whistleblower revealed it had overstated its profits by £250m.

Although the risks and implications of accounting blunders are greater for large businesses, small businesses should still work to minimise risk.

Train more than one team member to have a good understanding of the company’s books and make sure proper expenses management is in place.

And remember, you may not be required to have an auditor until your company is turning over more than £6.5m, but it is an option for small companies too.

5) Losing a key employee. When Justin King stepped down as CEO of supermarket chain Sainsbury’s, the company lost more than £150m of its market share overnight.

The departure of a leader or CEO can harm morale and outsider perceptions. So whether the boss is pushed out by a scandal or leaves voluntarily, it’s important to have a succession plan in place.