Fundamentals of Risk Management

Risk strategy
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This chapter has considered the importance of reputation in general and used
corporate social responsibility as an example of one of the main pillars of reputation. 
However, reputation is a broader issue than just business ethics. Indeed, customers 
will often trade with an organization even though they do not believe it to have a 
particularly ethical business model. Although only a cursory insight and discussion 
of reputation has been included in this book, the overriding importance of reputa-
tion is fully acknowledged, especially in relation to risk management.
The importance of brand and reputation is recognized by all organizations. 
Several companies that deal directly with the public have sought to build a reputa-
tion based on trust and ethical behaviour. For many organizations, this is not a
recent innovation, but is the ethos that underpins their customer offering. The
importance of reputation is demonstrated by the extract from the 2015 Annual 
Report and Accounts from Unilever PLC in the text box below.
TAbLE 
20.3
Threats to reputation
Component
Comments
Capabilities 
●
●
Failure to provide a clear indication to stakeholders
that the organization recognizes its purpose.
●
●
Failure to have adequate resources within the 
organization to ensure satisfactory governance
and/or deliver quality services and products.
Activities 
●
●
Business sector in which the organization operates 
suffers adverse publicity.
●
●
Finances are weakened, reducing the desire of 
customers to trade with the organization.
Standards
●
●
Insufficient innovation in services and products so that 
customers go elsewhere.
●
●
Reduction in quality of products and/or services or 
failure to deliver customer support.
Ethics
●
●
Unethical behaviour by the organization (CSR) 
indicating unacceptable values.
●
●
Failure to deal with customer complaints appropriately 
and with integrity.

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