A comprehensive Enterprise Risk Management (ERM) strategy can help protect your reputation by preventing events that damage it.
Reputation is an intangible asset. Much research and many seasoned observers agree that a good reputation enhances customer loyalty and purchase behavior, market value of the business, hiring and retention success, and brand image. Many of these factors are reflected in the asset we call “goodwill.”
Managing Reputational Risk in ERM
Reputational risk (or ‘reputation risk’) is one of the costs of events such as adverse actions for negligent hiring or publicized high-level fraud. Events like these are precisely the types of risky outcomes that your systematic ERM strategy aims to identify, evaluate, and mitigate. We do not have space to provide an exhaustive list of reputational risks, but we can illustrate the point that preventing selected negative outcomes can help protect your reputation, not to mention your bottom line.
“Almost everything that can go wrong in a business has a human capital component.” This quote from David Creelman of Creelman Research points out the critical importance of managing human capital risks. Often, risks associated with human actions are given only cursory attention until “something bad happens”. Unfortunately, when one of these risks contributes to a loss, it can be very costly in terms of brand, reputation, morale, or revenue.
Human capital risks commonly stem from these five critical areas:
Complacency
Turnover
Occupational fraud
Catastrophic workplace events
Negligent hiring or retention
This latest infographic summarizes each area and offers tips to help organizations better manage their human capital risks.
Your organization is at higher risk for occupational fraud than you might think. U.S. organizations lose more than $652 billion annually to fraud perpetrated by an employee, often a manager or executive. Victims include private or public companies, not-for-profits, governmental agencies, and any other kind of organization where managers and employees have access to financial or material assets.
One of the most challenging aspects of occupational fraud is that the perpetrators are usually people who have no prior criminal record. Well-run organizations use background checks to minimize risk in hiring, and prior infractions are generally grounds for refusing to hire a person. Yet people with previously clean histories who have earned trust in their positions may abuse that trust, using their privileged access to steal. … Continue reading
The first question on the mind of business owners, executives, and managers whose organizations have been victimized by fraud is how. Understanding the factors that cause an individual to commit an act of fraud can help companies avoid becoming repeat victims and put systems in place to prevent such acts from occurring.
Occupational fraud is defined as “the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.” Occupational fraud schemes are clandestine. They violate the perpetrator’s fiduciary duties to the victim organization. They are committed for the purpose of benefiting the perpetrator. And they cost victim organizations assets, revenue, and/or reserves. In fact, U.S. companies will lose 5% of their annual revenue to occupational fraud this year.
For good reason, prevention of occupational fraud is at the center of enterprise risk management strategies. … Continue reading
Avoiding the losses that result in cases of fraud is not a matter of luck or good fortune. Strategic fraud prevention programs, strategies, and processes form the front line of fraud defense by identifying and filling gaps before losses happen.
The Association of Certified Fraud Examiners (ACFE) has a valuable resource available to help assess the health of your existing fraud prevention processes. Known as the ACFE Fraud Prevention Check-Up, the self-administered ‘check-up’ can give you a candid view into your company’s vulnerability to fraud and identify major gaps in your processes. … Continue reading
