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Report: “Reputation Risk in the Cyber Age: The Impact on Shareholder Value"
For executive management around the world, the choice is clear:
A robust and tested
incident response plan is essential toward stopping
the negative momentum of
a reputation event.
Expect scrutiny from
experts and prepare to communicate the core technical details, particularly when the reputation event is technology-related.
Rather than announce a series of piecemeal national recalls, recognize that operating in a global market requires a global response.
When the apparent error
has been to deceive, any perceived opacity in response will only make matters worse.
Companies must atone for mistakes via a program of active, social responsibility that is associated directly
with the crisis
BE PREPARED
Be coherent
Be global
Be transparent
BE GENUINE
While the reputation events in the case studies were all different, for those
organizations that survived – and thrived – their crises showed five key attributes:
What the winners did well
“Savvy companies that develop and use a robust risk management framework can not only better navigate reputation events but can often see a net gain in value post-event.”
– Randy Nornes,
Aon
“Technological developments
have heightened reputation risk by making it easier, cheaper and faster for people to spread news.”
– Dr. Deborah Pretty,
Pentland Analytics
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-10
10
240
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180
160
140
120
100
80
60
40
20
20
30
2000 Losers
2018 Losers
2000 Winners
2018 Winners
Winners and Losers
The widespread use of social media is accompanied by a doubling
in the impact on shareholder value from 2000 to 2018.
A main focal point of the study is investigating whether a reputation event is inevitably bad news and will damage the brand beyond repair. The evidence shows a more hopeful picture for the proactive. When a reputation event hits – for example, a cyber attack – a flood of new information hits investors who try to make heads or tails of the situation. Based on how managers behave, investors will be either impressed or disappointed, and will re-rate the stocks into winners or losers.
The quantifiable impact of a damaged reputation
2000
Ford Motor
McDonald's
AT&T
Walt Disney
Coca Cola
IBM
Nokia
Microsoft
Intel
General Electric
The world's top ten brands in 2000
2018
Mercedes-Benz
Toyota
Samsung
IBM
Coca Cola
Facebook
Google
Microsoft
Amazon
Apple
The world's top ten brands in 2018
2000
2018
Brand Value*
Reputation Premium
Book Value
1000
800
600
400
200
0
While there were only four technology brands in our 2000 list,
they comprised seven out of 10 in 2018
The impact of high-profile reputation events — from frayed public relations to social media backlash — is reflected in a company’s share value. The “reputation premium”, as we call it, represents a firm’s earning power that’s not captured in either the brand or net assets. The valuation of the world’s top brands greatly depends on their reputation premium:
The value of
reputation premium
Because our embrace of technology was not as prevalent 20 years ago as it is today, Cyber risk
wasn’t visible in this same study conducted in 2000. Yet in 2018, the risk is unmistakable, as there
were 23 cyber attacks in the study (approximately 18% of all cases).
The risk implications involving connected, smart devices through the Internet of Things are becoming clearer. As cyber encompasses many facets — including being an unexpected crisis in and of itself —
it is increasingly important that any reputation risk management strategy understands cyber risk and works across departments to properly gauge organizational exposure.
When cyber attacks
Pilot hearables
2017
Oculus Rift
2016
Apple Watch, Ringly
2015
Alexa
2014
Google Glass, Samsung Galaxy Wear
2013
2011
Snapchat, WeChat
BYOD becomes mainstream, Siri
2011
2010
Instagram, Pinterest
iPad, first 4G ‘phone
2010
2009
Tumblr, WhatsApp
First 3G ‘phone, Fitbit
2008
iPhone
2007
2006
Twitter
2005
YouTube, Bebo
2004
Facebook, Flickr
2003
Skype, LinkedIn
BlackBerry’s integrated ‘phone
2003
2002
MySpace
Cloud technology, Nokia & Sanyo
camera ‘phones
2002
WiFi
1997
1999
Blogger/Friends Reunited
Bluetooth headset, Blackberry,
Microsoft Tablet
2000
2017
2016
2015
2014
2013
2012
2011
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2010
2009
2008
2007
2006
2005
2004
HOVER TO SEE TIMELINE DETAILS
2003
2002
2001
2000
1999
1998
1997
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Wireless/Wearable Technology
Social Media
From the introduction of WiFi in 1997 to today’s wearable technology,
more people than ever are sharing their opinions and spreading news.
Every business undergoes a reputation event — product recalls, executive malfeasance, cyber attacks — that cuts to the core of their brand’s perception. And the combination of our 24/7 news cycle with widespread use of social media puts brands at risk that their reputation event will have long-term negative consequences, both in public perception and in the marketplace.
The latest report by Pentland Analytics and Aon Reputation Risk in the Cyber Age: The Impact On Shareholder Value investigates how reputation risk has amplified in an age of instant communication and connectivity. “Although risk management awareness and tools have evolved, reputation risk continues to weigh on corporate executives as one of their leading concerns. For the past 10 years, reputation risk has occupied one of the top spots on Aon’s bi-annual Global Risk Management Survey,” said Randy Nornes, enterprise client leader, Aon.
Increasing competition
3.
2.
Economic slowdown/slow recovery
1.
Damage to reputation/brand
Increasing competition
Damage to reputation/brand
3.
Economic slowdown/slow recovery
2.
1.
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Social media and a 24/7 news cycle mean that the value impact of a reputation crisis has never been higher.
When Crisis and Technology Collide: Protecting Reputation in the Digital Age
Source: Aon’s Global Risk Management Survey
USD BILLIONS
VALUE IMPACT (%)
EVENT TRADING DAYS
The study identified key drivers of a successful recovery
for a reputation event:
• Crisis communications must be instant and global
• Perceptions of honesty and transparency are essential
• Active, social responsibility is critical
You can either react to a reputation event or be proactive when it inevitably occurs. To react is to lose control of the event’s narrative, which subjects your brand - and your valuation - to the uproar of all those eager to voice their opinion on social media.
But those proactive brands that properly plan for such adverse events
and communicate in a genuine manner will find that the market not only
forgives, but may also reward those that embrace and respond effectively
to their reputation event.
*Source: Interbrand
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