VW's crisis puts reputation risk management firmly on the map

The Volkswagen emissions debacle will catapult reputation risk management on to the agenda at every company's board meeting and keep it there.

Only time will tell what the Volkswagen crisis will mean for its future, but the story shows without question that corporate reputation management must – and I believe will – be elevated to the highest level of good corporate governance, with significant benefits for the PR industry.

If anyone doubted that corporate reputation management was a primary matter for companies and their boards, the revelations about VW emissions testing surely prove them wrong. Corporate reputation and corporate success are entwined – it is just sometimes hard to measure – but when billions are wiped from your share price and doomsday appears in a matter of days, the metric is very apparent.

It also reveals how urgently and rigorously companies need to put themselves under the microscope to make sure they know where all of their potential risks are. At VW, for example, this instance is not necessarily ‘breaking the law’, but breaking or bending a weak law.

For the PR industry this all offers great potential to become even further valued by companies and integral to the highest level of strategy. Intelligent and sophisticated crisis and risk evaluation, and strategic approaches to reputation management, are one of the PR sector’s many strengths and we are ideally placed to help companies avoid the situation in which VW has found itself.

Currently, reputation risk evaluation is undertaken by perhaps only a fraction of the companies that would benefit from it. Watching the VW story dramatically unfold will, I am sure, mean it is discussed in every boardroom. However, this time it is likely to be an issue that stays on the agenda and will, I believe, provoke three things that will have an impact on the PR industry.

First, companies will take this as a trigger to examine their own risk profile – and the PR industry has the skills to provide risk audits from an internal and external perspective, identify potential issues and recommend good practice and solutions.

Second, it is quite likely that the crisis will lead to the shareholders of public companies demanding clarity on reputational risks that surround them. In the same way that vast analysis is undertaken on companies’ ability to withstand macroeconomic and marketplace factors, I foresee that regulated audits will be required of their ability to withstand reputational damage. As an extension of this, reputation management will be elevated within all board discussions, with it becoming part of the formal reporting included on regular agendas.

Third, I think this will begin to cement the ability of the PR industry to prove its value – for despite many strides forward in measurement, doubts of measuring its value persist. The fact that getting it as wrong as VW has can result in such catastrophic financial consequences will, I believe, prove beyond doubt the value of reputation and its management.

Laura O’Connell is managing partner at Instinctif Partners

 

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