In my previous blog, I explained how to anticipate risks to reputation as early and as comprehensively as possible by building the right capacities to become a reputation-conscious organisation. In this instalment, I look at how to analyse and assess the potential impact of reputational harm to your firm.
By this point, your capacities for predicting reputational risk should be ship-shape and Bristol fashion. However, as any General Counsel right now will tell you, the choppy waters in the year ahead will present a challenge to even the sturdiest of vessels.
Being an active, listening, organisation can only take you so far. It is all well and good to know that there is a storm brewing, but it might also help to know how and when it might occur to avoid sailing directly into it. There is where scenario planning plays a crucial role. Scenario planning is an established tool for analysing and quantifying how reputational risks might manifest into organically developing events that require active crisis management. It nonetheless remains the most effective method for turning the ‘inputs’ – the raw information gathered through early warning and horizon scanning – into tangible intelligence to support business planning.
In this article, we will walk through the key steps to undertake a scenario planning exercise.
The worst of all possible worlds
The most useful starting position is always to identify the very ‘worst case’ scenario. Allow the imagination to run wild: what is the worst possible scenario we can envisage?
To take as a case study, let us presume we are tasked with analysing and assessing the reputational risks which could arise from a major corporate restructure. At this point, many of us might naturally start to think of the specifically disastrous crisis events – for example, a rainmaker becomes disgruntled and defects to a rival firm. However this is not so much of a scenario, but a trigger – i.e. an event which could lead into a scenario of reputational harm, rather than the risk itself. Instead, identifying your scenario means a focus first and foremost on potential reputational damage to the business. This is primarily a question of perception. As such, in our example, it may be shifting perceptions within market. Our worst-case scenario might be that the firm is no longer regarded as a market-leader within a key area of practice following the restructure.
Upon identifying our scenario, the next step, before returning to trigger events, is to explore the impact of reputational damage upon the wider activity of the business. At this point, we are looking for the possible practical repercussions upon finances or business operations. This is illustrative of the real-world consequences of the reputational harm inflicted by a crisis event – if the firm were no longer regarded as market-leaders within the area of practice, what would it mean for the business in the immediate, medium and long-term?
In our scenario, an impact could be that the partner takes a major client along to the new firm. This may be a somewhat obvious, and arguably likely, consequence of his departure – but at this point, it is also good to think in the broadest problems terms: how financially viable will the practice without the partner? Could it lead to loss of instructions in other associated practices?
The final piece of the jigsaw is to return to the trigger events. At this stage, it is important to have a scope sufficiently wide to capture as many possible routes as possible into crisis. By doing so, we can conceptualise how multiple triggers can coalesce to heighten or deepen the worst-case scenario.
The departure of our leading partner is an obvious trigger event – but what other situations may arise from the restructure which could lead to our scenario, that the firm is no longer regarded as a market-leader for this practice? Might clients also respond negatively to changes within their client team as a result of team mergers? Some triggers might also be escalators, solely insufficient at any one moment to lead directly into the worst-case scenario but can be consequential within the broader scale of the crisis – for example, what if the practice were to tumble down the directory rankings as a result of all of the above?
The art of preventing triggers is commonly known as issues management – and is an important part of crisis prevention. Likewise, looking to mitigate the worst impacts is an important pillar of crisis preparation. If this exercise is undertaken in the midst of planning for an already identified crisis, we might also want to supplement our scenarios with tactical recommendations in line with the wider strategy for prevention and/or preparation. This might include on-the-record statements and journalist Q&As arranged via sub scenarios linked to trigger event. This can help to provide flexibility to respond to developments as the timeline progresses.
The Scale of the Problem
With a scenario plan in hand, we can assess the magnitude of the reputational harm pertaining to each event. Where does it stand on the Beaufort scale – is it a potential shipwreck in on the horizon, or just a storm in a teacup?
Taking a step back, to examine the external landscape, is a good place to start. Much of this will be intuitive to communications professionals with a finger on the pulse of both the sector and wider socio-political environment, but for others this can revelatory. The sort of information we are looking to include could be a digest of current topical debates, insight or data on opinion amongst key stakeholders (including sentiment tracking), and an analysis of prevailing narratives within the news cycle.
This may look to incorporate market intelligence – and might traditionally be done alongside a stakeholder mapping. Who is interested in it and why? At this point, it is valuable to draw upon real-life comparisons with others in the sector. How did they deal with a comparable crisis? How did it play out in the media? What strategy did they deploy? What were the consequences – might we deem it a success?
Any assessment of reputational risk would not be complete without reference to the risk register. At this point, we should have enough information to inform an initial evaluation of the likelihood and threat-level for each event. This can be done via a simple scoring mechanism, 1-5, or through a traffic light system. Again, it is important to remember that we are concerned primarily with the reaction of stakeholders in making this judgment. For example, the threat-level of a given scenario may be greatly influenced by how presuppositions of certain journalists may lead to a line of questioning which may heighten or deepen the crisis – by drawing together multiple triggers of escalators. This is the classic ‘perfect storm’. These are precisely the sort of considerations to bear in mind when making these calculations. One might imagine how the threat level of our departure event might increase dramatically upon consideration of how other contributory factors – both internal and external – such as the exit of additional partner-track associates or aggressive moves by a key competitor. Typically this can create a spiral into a crisis with a ‘long-tail’ which can persist for months or even years.
Finally, we might look to present an initial recommendation on the best approach to mitigation and / prevention. Although we are still looking to predict and analysis risk, rather than resolve it, decision-makers will need to have confidence in the ability of their team to handle it as part of their understanding of the risk before making a judgment. Even with the assessment in hand, senior leaders may sometimes choose to proceed with a high-risk option if it has confidence in the competency of its team. In other situations, it might be the only viable course of action.
They can, in almost all scenarios, be confident that there will be far fewer surprises on the horizon. After all, worse things happen at sea.