Asking the Tough Questions About Managing Reputational and Culture Risk

Workplace culture risks can quickly erode an organization, diminish productivity and ultimately impact profitability

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As the modern business environment evolves from a brick-and-mortar to a technology-based workplace, it presents unique opportunities and challenges. And while Industry 4.0 is full of promise and potential, CEOs and boards now face greater and more varied exposure to risk that will only grow.

Among these risks includes their organizations' reputation and culture. Over the previous months, we've seen nearly endless news detailing troubled corporate reputations and tarnished brands. No industry or sector is immune and social media only amplifies and accelerates the impact.

Many of these headlines can be traced back to misalignment in employee values and leaders failing to take ownership of their corporate culture. Workplace culture risks can quickly erode an organization, diminish productivity and ultimately impact profitability.

Undoubtedly, technology will play a crucial role in Industry 4.0 risk management, but the most important component will be an intangible one—courage. Leaders need the courage to admit they don't have all the answers, courage to ask the right questions and courage to act on the information they uncover.

Aligning the Priorities

More than any other threat, reputation risk is interconnected with other business risks, so the first question leaders should ask is: "Does our organization make reputation its top priority?"

Senior executives and board members have a tremendous influence on reputation. Among everything else within their oversight, it's one of the few risk domains they can directly control. Despite that, fewer than half of respondents in a Deloitte survey of CEOs and board members said they've discussed their organization's reputation in the past 12 months.

Leaders can do more to move reputation higher on the corporate agenda and to define an approach to effectively manage reputational risk.

Next, leaders need to know whether their organization is addressing workplace culture risks head-on.

Effective organizations deal with culture risk by addressing questions like:

  • "What does the organization stand for?"
  • "Does the organization clearly communicate strong values?"
  • "Is the organization's vision and mission statement tied to those values?"

In a digitized business environment, information is essential to understanding and managing culture risk. However, the same survey shows that 65 per cent of responding CEOs and 62 per cent of responding board members say they lack a process for identifying signals indicating potential culture risk. Building a framework that brings together different activities can assist leaders in assessing what's happening in the workforce.

Deploying Technology, Detecting Risks

Good leaders gain insight by listening to what people say and, more importantly, knowing what people do. Too many CEOs and board members take a reactive approach to managing incidents before getting seriously engaged in workplace culture risk.

Tools and techniques for managing culture and culture risk are rapidly maturing. They can help leaders understand and shape culture and to predict, prevent and respond to culture risk events. Today, many organizations are linking data in areas like insider threat monitoring and employee behavior, to name a few.

And although some executives might be uncomfortable with the idea of monitoring, deploying a risk assessment tool can help identify critical issues such as employee misbehavior, safety, data privacy and intellectual property access.

Reputation Risk as an Ever-present Challenge

Because reputation risk is so intertwined with other business risks, managing it will always require the courage to ask tough questions and demand serious answers. With all the potential causes of a reputation-affecting event, an organization's reputation is constantly vulnerable.

There are many organizations that don't truly understand the role culture plays in performance and success. But there is an encouraging trend away from traditional approaches to reputation and culture risk to more forward-looking and proactive ones.

A growing number of CEOs and board members now understand that failure to deal with these risks can impede their ability to reach strategic goals and that managing them demands the highest level of leadership priority and engagement.

Courageous action is a "special kind of calculated risk-taking." It's not always easy to ask the tough questions, seek out the honest answers and take ownership of risks to reputation and culture. Courageous leaders live up to their responsibility as drivers and stewards of their organization's reputation – it's the most valuable strategic asset.