Corporations have long included litigation, prosecution and regulatory investigations in their risk planning. Self-evidently, losing publicly in the courts, or even winning at a cost, can create a multitude of long-lasting problems. Simply being involved in high-profile legal proceedings inherently carries a risk to a company’s reputation, however the degree of potential reputational harm involved will depend on a variety of factors.
While the specifics of legal or regulatory proceedings can be dry, technical matters that are unlikely to pierce the public consciousness, e.g. minor non-compliance with an industry-specific regulation, some will cross the threshold into potentially influencing consumer behaviour and purchasing decisions. Knowing when legal or regulatory matters approach that business-critical threshold is key and should shape the response.
When a business’s core values and how these are realised in its operations are called into question, the reputational fallout can be far-reaching. Legal processes are a common means for these issues to come to light due to the public nature of the process, which invites scrutiny and creates multiple trigger events for critical media coverage. During a litigation or regulatory investigation, reputational harm can arise at each stage of the process, and is not confined to the point where there are findings against the business; critical damage to a reputation can be done long before the conclusion of these typically long-running processes.
Legal matters that revolve around issues that could be considered ethical violations would immediately enter the category of holding significant potential for critical harm to a business’s reputation. For instance, across all sectors of industry, allegations of large-scale financial fraud, non-financial misconduct, or environmental harm can severely damage public trust in an organisation. Equivalent threats for specific industries would include for example, in fashion: issues involving modern slavery or poor working conditions in the supply chain, or in tech: data breaches or violations of customer privacy. In manufacturing, matters arising from legal issues pertaining to public health and safety, such as product defects, contamination, or safety violations, would also carry considerable reputational risk.
These types of legal challenges will not only receive widespread media coverage, but hold the potential to become consumer stories – they can reach outside of the “bubble” – with faces and names put to the harm suffered, generating public empathy and outrage. In such cases, the resulting public scrutiny could affect customer loyalty over the long-term. This is not to say that legal issues arising from a purely technical issue, such as industry-specific regulatory non-compliance or a contractual dispute, do not hold risk, but allegations that can cross a threshold into consumer stories will by nature receive more attention and pose more severe challenges to a company’s core values and reputation. Sometimes you can be technically in the right, from a legal perspective, but still suffer the fallout from allegations of this kind being made in the first place.
For organisations facing a reputational risk attached to a legal process, aspects that require particular consideration in the communications response will include:
- Assessing the potential reputational reach and impact through worst-case scenario planning
- Focusing on achieving clarity of message to help shape the narrative that emerges
- Carefully mapping the communications response onto the legal process, planning for each new phase of the process and building in an understanding of the trigger events the process will give rise to, and what information will and will not be made public during the proceedings
- Dedicating resources and time to continuing stakeholder engagement. During long-running processes there can be significant time periods between new developments and information vacuums can develop and give rise to misinformation or counter-narratives. In these situations, working to maintain consistency of message and engagement through regular communication will be vital for maintaining stakeholders’ trust in the organisation.
In sum, when facing a new reputational risk as a product of legal proceedings, considering the potential media and public interest in the matter is an important starting point. Beyond this, understanding if, when and how the proceedings could cross a threshold into a story that will travel into wider public consciousness is essential.
Whether a legal issue has lasting repercussions on sales and brand loyalty often depends on the nature of the issue itself—ethical issues will resonate more strongly with consumers than operational oversights or minor regulatory violations. Furthermore, the length of legal proceedings can increase the risk contained in the proceedings, making timely and strategic communication even more crucial for organisations in this situation.