Don’t Get Burned When the Crisis Hits: Use a Heatmap to Manage Reputation Risk
By: Dave Vermillion, Senior Strategist & Managing Director, Firehouse Strategies
Published on March 13, 2019
Proactively managing reputation risk is more critical today than it has ever been before. The speed of communication through social networks, combined with elevated stakeholder expectations for transparency and immediate action, has increased pressure on organizations across the spectrum of industries.
Historically, risk management has focused largely on finance and operations. Today, the most enlightened organizations recognize that reputation risk, while difficult to measure, poses a greater threat to the business than previously assumed. According to the 2017 Reputation Dividend Report, 20% of the value of the S&P 500 is attributable to reputation.
Good governance dictates that every organization, irrespective of size or public profile, should understand their reputation risk profile and put plans in place that anticipate potential threats to the enterprise. As an old colleague used to say, “A crisis is not the time for original thought.”
When we work with clients to prepare for crises, the first step we take in assessing reputation vulnerability is to analyze the organization’s risk profile. A proven best practice to begin that process is to “map” areas of reputation risk to determine the universe of likely threats that could disrupt the business. A reputation risk heatmap is a simple but critical tool that anyone can use to assess and score reputation threats according to two key metrics: impact on the organization and likelihood of occurrence. While not overly sophisticated, this rubric applies an element of rigor to the assessment. Involving other internal stakeholders in this process also helps reduce subjectivity that often compromises risk management.
The process can be straightforward. First gather a comprehensive inventory of potential risk areas, then assign a score from 1-5 on how often or likely the issue may arise (ie. rarely, annually, daily, etc.), and a score of 1-5 on how disruptive it was (or would be) to the business (ie. nuisance, manageable, catastrophic, etc.). Average out those scores across the group to determine a consensus score on each axis and plot it on a 5 x 5 grid.
The upper right red area on the map will contain the most likely and most potentially disruptive events. These are the areas where the organization needs an immediate plan in place to address this risk and help mitigate potential reputation damage. The areas in yellow are second priority areas that require attention when resources permit. The lower left green area are lower level risks that should be monitored in case status changes. Through this exercise, many clients come to realize that they have been devoting resources and attention to less critical issues while they lack a plan to mitigate the real threats. The heatmap helps direct resources to where they are needed.
Firehouse Strategies, in partnership with our friends at 0ptimus, has developed an effective methodology for building dynamic risk heatmaps that are ideal for large global organizations who manage a broad portfolio of risk areas. Our approach employs algorithms and ongoing stakeholder sentiment research to streamline the risk assessment process and update the heatmap on a regular basis to provide new insights in a custom dashboard that can help communicators and boards understand their reputation risk level.
Like the batteries in your home fire alarm, your heatmap should be checked regularly to reflect any changes or additions to the risk inventory and internal stakeholders should use it as an organizing tool to help orient their activity in planning for potential crises. Once this inventory and planning process is underway, the next step is to review and address decision making within the organization to ensure the team is ready to respond quickly and decisively when a crisis hits.