The dangers of trading off your reputation

Fighting back from reputation scandals is extremely difficult.  How long will it take for the public to trust FIFA, or Volkswagen? Months?  Years? Would the current VW fiasco make you steer clear from purchasing a shiny new Golf?  The financial impact of a company’s dent in reputation can be enormous and long lasting.  Volkswagen’s shares continued to fall and are now down about a third since the scandal broke only a week ago. OK, so much of this will be shareholders reaction to the hefty $1.8 billion fine expected to be levied on the firm, and the impact on sales is still to be felt, but rest assured there will be a dip in sales, some of which will be a direct reaction to a now tarnished reputation.

And in some respects the VW effect may reach beyond the city of Wolfsburg, VW’s home town.  The “Made in Germany” brand which oozes manufacturing quality, stability and trust is likely to require some sensitive marketing in order to regain its reputation. The Brand’s (and German economy!) that bask in its glory, as well as the suppliers to VW and those that benefited from its previous consumer loyalty, are likely to feel the impact of the VW affair on their bottom line for some time to come.

But it doesn’t have to be illegality that tarnishes the reputation of an organisation and impacts its sales. Miss-management, security breaches, data insecurity (think Ashley Madison!), all impact consumer trust and reputation.

In June of this year, four people sadly lost their lives in the Wood Flour Mills fire, near Macclesfield.  Wood Treatment Ltd, the company that owned the site has been accused of poor management, a disregard for health and safety procedures and a culture of risk.  Time will tell how the incident impacts the firm and what the outcome of any investigations may be, but it is safe to say that there will be a financial impact, whether that is from a reduction in sales or simply through losing one of their major manufacturing plants, only time will tell.

The cause of an incident doesn’t need to come from within.  3rd party suppliers and contractors trading off your name and reputation can also cause a direct negative effect if their practices put you in the spotlight.  Think Thomas Cook.  Regardless of the fact that it was the errors of their 3rd party supplier hotel, owned by Louis Group, that lead to the deaths of Bobby and Christi Shepherd in 2006, the public outcry and subsequent boycott of Thomas Cook after the inquest in 2015, meant that the shockwaves of the incident will be felt by Thomas Cook, potentially, for years to come.

Those at the top of organisations such as these must be accountable for the procedures and processes that they put in place, and it is solely their responsibility to ensure that those procedures are being followed.

 

Building a culture of compliance should be something that every organisation strives for and ultimately achieves.  Whether it’s employees adhering to security policies, changes in legislation, data protection, health and safety, ethics and integrity, recruitment policies, equality and diversity; all these and more can negatively effect your organisation if not followed by all employees. And the process does not need to be hard to achieve. Ensure staff and contractors are engaged in your organisational beliefs, and policies are brought to life through training, reinforcement, verification, assessment and testing.

If you want to find out more about how Enterprise Study can help you build a culture of compliance, call 01242 254 254 or email mark.baldwin@enterprisestudy.com

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