WHEN did you last hear a local CEO talk about his company’s reputation?
A look at recent events involving Volkswagen, MTN and Murray & Roberts, although all very different, highlights the crucial role that reputation and brand risk management play in today’s fast-evolving world.
And, yes, there is a difference between reputation and brand.
Twenty or so years ago the major assets of companies were the so-called tangibles ("hard" assets such as bricks, mortar and machinery) on average making up 80% of market cap, with the remaining 20% of intangibles ("soft" assets of intellectual property, copyright, patents and brands). For the most part that has totally reversed, while many senior executives remain trapped in the thinking of the past. Today the major assets of a company are brand and reputation.
Companies such as Facebook and Google have turned business upside-down, while Uber, a mere app, hardly more than a smartphone device, which only started in business six years ago, operates already in 60 countries and in December was valued at $51bn. As to tangible assets, net asset value, whatever — they are negligible.
Technology has turned the world upside-down, social media operates in real time and everyone has a voice that can be heard. Never more has building and protecting good reputation, "positive brand equity" as it used to be termed, been more crucial, something Toyota and Nike understand, and have used to good effect, Let’s face it, most companies will have setbacks from time to time, often in areas out of their control.
In the world of risk management how much attention is being given to reputation and brand issues? A basic mnemonic that can be applied is SARA standing for Share Avoid Reduce Accept.
Volkswagen was quick to Accept, although they had had since 2008 to prepare for being found out, M&R has been in SRA mode, while sadly MTN seems to be fumbling with its ABC.
It is also interesting how successful Volkswagen in SA has been in keeping media coverage minimal while it is the talk of the world, a skandaal that could cost upwards of €5bn.
"The Volkswagen ... brand is experiencing challenging times," said a German spokesman — the understatement of the century.
Globally, Volkswagen can expect many years of torrid and expensive legal activity while in SA there is hardly a murmur.
The current issue of The Harvard Business Review lists The Best Performing CEOs in the World with Lars Sorensen of Novo Nordisk, the Danish pharma group being voted the winner. In his opening comment he refers to ensuring the sustainability of "our reputation", he also refers interestingly to reputational issues he had to handle in SA.
Now how many senior board members and senior executives in SA can carry on a meaningful conversation about reputation and brand issues? How many companies have these issues built into their risk management programme?
In these times of increasing shareholder activism, when transparency is crucial, it is time to take stock.
• Sampson is a corporate strategist and visiting professor at the University of Cape Town’s Graduate School of Business