Act ‘Quickly and Appropriately’ to Protect Brands: Lloyd’s/Airmic Advise

March 19, 2014

Companies should be aware of how best to protect their brands after an incident. “The key to remaining resilient and keeping brands and reputations intact is responding quickly and appropriately,” Lloyd’s said, citing a recent report from Airmic, the UK’s risk management organization.

As an example Lloyd’s cited the “Cumbria rail crash in February 2007, which resulted in one death and several injuries. The crash involved a ‘Virgin Trains’ train. Immediately after the crash, Richard Branson cut short a family holiday to visit the scene of the accident and the hospitals treating injured passengers. Branson praised the efforts of the train driver, calling him a hero, and the strength of the Pendolino train, which he said was ‘built like a tank.’”

Paul Hopkin, technical director of Airmic and one of the authors of “Roads to Resilience”, a report by Cranfield School of Management on behalf of Airmic, explained that Branson was “there showing concern at the highest level and protecting the reputation of the railway company in which Virgin Group owns the majority share.”

Roads to Resilience follows on from Roads to Ruin, which was published in 2011. This first report analyzed over 20 significant corporate crises of the last decade to trace their deeper causes. Several of the case study companies did not survive and most of the rest suffered severe damage.

The new report looks in detail at eight “high reliability” organizations, identifying five related and inter-dependent principles that might help organizations protect their reputation and achieve their goals.

“An effective ‘risk radar’ can help an organization identify issues before they develop into major incidents,” Lloyd’s said. “Resilient organizations will consider what the negative trends are that could damage the reputation of their sector and/or do considerable damage to their competitors,” Hopkin explained. “The next step is then how to respond.”

The report noted the difference between “the conventional approach to risk management,” which it explained “tends to follow a traditional organizational hierarchy;” whereas the approach outlined in Roads to Resilience advocates having “unimpeded communication about risk management throughout an organization. “Fostering an organizational culture where such information can be readily shared is key to generating the involvement and commitment of all employees,” according to the report.

One of the most important actions a company can take is to respond to the situation as rapidly as possible. “Resilient organizations are typically able to respond rapidly,” the Airmic report noted. “They recognize that responding to adverse circumstances is not just about operational recovery or continuity – protection of reputation should be paramount.”

As another example Lloyd’s cited the actions taken by the InterContinental Hotels Group, which found itself “in the center of the storm when the Arab Spring broke out. It immediately went into crisis management mode and even shared its approach with other hotel groups that were adapting to the political unrest.”

“Reputational risk can arise from almost everything the company does and doesn’t do,” explained Dan Trueman, head of cyber insurance at Novae. “It’s not just its actions but its omissions that can affect its reputation in the marketplace.”

According to Hopkin, “resilience has become one of the most important concepts in the risk management community. It encapsulates an approach which blends enterprise risk management with crisis management.

Trueman described the concept of “resilience as being the “ability to bounce back and also the ability to roll with the punches. The best and most resilient organizations not only think through their risk profiles or the things that could affect them to a greater and lesser extent, but they also plan ad nauseam for when those events happen.

“They carry out business continuity planning,” he added. “They don’t just pay lip service to it. They practice and train their senior executives for that moment when the CEO is stopped by the media outside his or her front door at 6 A.M. in the morning. And if you can think through that in advance of the event actually occurring, that’s where you become resilient.”

An increasing number of reputational insurance products are available in the market and are structured as non-physical damage business interruption policies. They are often purchased as add-ons to product or cyber liability insurance, Trueman explained.

He also indicated that as well as providing indemnification, insurers can also offer access to crisis management experts. “In the purchase of the insurance product, the assured themselves has built more resilience into their systems, so they’re a better risk profile for us and it’s a multi-win situation, he concluded.

Source: Lloyd’s of London/Airmic

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