Monday, January 16, 2012

Risk management and reputations: capsized cruise ships and mice in salads

Today, as stock markets opened, the share price of Carnival fell by 20%. I wondered if the directors and managers of the owners of Costa Concordia had listened to the Freakonomics podcast about A Mouse in the Salad.

The podcast recalls as case of a mouse being found in a salad at an up-market chains. It uses the case study to describe how companies deal with unfortunate incidents which pose a threat to their reputations.

The issue of reputational risk is not just a matter for shareholders and directors in the commercial world where brands are worth billions. Reputational risk can blow public and third sector organisations off-course too. Last year we saw the Metropolitan Police shaken at the very top by allegations.

Being prepared is always a good start when it comes to risk management. Too many organisations think that a periodic update of a risk register is enough. Contingency plans for specific situations as well as generic bad stuff should be in place. While media training may not be necessary for smaller organisations, leaders of all organisations need some support and guidelines in place for when necessary, especially if they might be unfamiliar with media glare. Having a link with PR agency for emergencies might come in handy as well as building up strong relationships with the media and other stakeholders in good times.

Listening to the Freakonomics podcast (or reading the transcript) highlights the importance of communication, transparency and ownership when things go wrong. The sooner that Carnival learn that, the quicker that their business will right itself.

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