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5 Ways Your Company's Reputation Is at Risk

A company's reputation is one of its biggest and most important assets. When people hear and say great things about an organization and its good standing is reported in the media, it may receive more customer inquiries, see increased profit margins and be able to expand its operations. After a public relations disaster, the reputation a firm has worked diligently to build can easily be destroyed - and may be nearly impossible to rebuild. That's why it's essential for businesses to continually assess their reputational risks to avoid worst-case scenarios as much as possible. 

1. Ethical Lapses
Strong ethics initiatives are essential at any company, and particularly for firms that want to avoid staining their reputations. Limited ethics practices can lead employees, no matter what their position, to slip up and make serious judgment errors. Theft, accounting fraud, and other illegal activities may be the result of a single employee's behavior, but they can have a significant impact on a business as a whole.

Instances of illegal business activity, especially among large corporations, are highly publicized and make their way across media outlets quickly. Even a minor ethical issue can spiral out of control once the word hits news channels and can cause serious harm to a company's reputation in just hours. Clients may be unwilling to continue working with a company that is quickly becoming known for a fraud or insider trading investigation, which could cause profits to plummet as long-time customers seek new partners.

To deter the risk of reputational damage from ethical issues, it's critical for businesses to have in place strong mechanisms that deter employees from breaking the law. Setting high standards and significant repercussions for noncompliance with these expectations can help prevent such occurrences and potentially serve to bolster a company's reputation in the long run.

2. No Corporate Social Responsibility Policies
With more consumers and investors concerned about environmental sustainability, waste, pollution, and the impact companies have on the areas in which they do business, corporate social responsibility is a growing trend. More organizations are implementing processes that allow them to lower pollution and resource use, increase recycling activities, and give back to the communities in which they do business.

On the other hand, those companies' competitors could be at risk for a plummeting reputation if they have failed to implement corporate social responsibility policies their consumer and investor base expects. With social media use so common and information instantly accessible via the Internet, it's easy for potential customers to see what their favorite companies are doing to better the planet. Individuals who discover brands have no current initiatives and believe they are being contradictory may spread the word via popular networking websites, which can anger millions of potential customers and prove damaging to a company's standing.

While there's always a risk consumers will unearth a company's limited corporate social responsibility plans and raise awareness, the possibility of a disaster and the fallout of such an event are even more damaging. Several American apparel retailers learned this lesson the hard way when a factory fire in Bangladesh killed more than 100 workers in November 2012, and a facility collapse just a few months later left more than 1,100 workers dead. The factories were found to have various safety violations the retailers failed to address. If the companies had kept a close watch on their overseas clothing suppliers, they may have avoided these public relations disasters. Those who had quick responses to the disasters - and had contingencies built into their supply chain to make changes - fared better in the public eye.

3. Customer Service Failures
If consumers are treated poorly, a corporation risks significant damage to its reputation. It will lose key references who will not recommend the company to friends, family members, and business associates.

Because companies want current clients to act as brand ambassadors and extol the advantages of their services, they need to work hard to consistently improve the customer experience and ensure all consumers are well-served. Employees who are short with clients, are unwilling to provide solutions to fit their needs, or who fail to follow up on requests may send the wrong message to consumers and tell them a company doesn't actually care about their needs. Those who have a poor experience may complain to potential customers and prevent them from working with a company or even take their issues to social media sites. This can cause a client's bad experience to go viral and hinder an organization's attempts to improve its reputation.

Some businesses may need to launch training initiatives that teach newer employees how to interact with clients and give them the best experience possible, while reminding more experienced professionals of how they can go out of their way to improve a customer's experience. Identifying key problems within a company's consumer management strategy and developing a plan to eliminate those issues are ways for an organization that wants to keep a firm handle on client relations and prevent its reputation - and sales - from going downhill.

4. Low Employee Satisfaction
Ensuring employees are happy isn't just a way to build up a brand's internal culture, it's also a way to improve a company's reputation with the public. Satisfied teams are more likely to feel positively about their jobs and have a stronger sense of attachment to their employers. This makes it easier for them to encourage others to try a brand's products or services and promote the company even when they aren't on the job.

Content employees are also more likely to go out of their way to provide better client experiences and ensure customers are better served. Customer service training initiatives are essential, but they may not work as well if employees are dissatisfied with their positions. Brands with good reputations, such as Google, Whole Foods Market and Facebook, are often known for being some of the happiest places to work.

5. Data Breaches
Businesses rely on technology more than ever, and while this may make some processes easier, it carries with it a reputational risk. Data breaches have become more common in recent years, as hackers look to gain access to corporate secrets, financial data, and customer information. As such, it has become imperative for companies to employ stronger systems to protect digital files.

Firms that do experience a data breach need to own up to the mishap, which can cost them valuable standing with customers. Some consumers may feel a business didn't sufficiently prepare for a cyberattack and didn't take risks seriously, which can make a firm appear ill-prepared to handle other important tasks. Others may blame a company for losing their personal information, which can also have a damaging impact for a brand looking to grow and gain a following. Customers may feel uncomfortable giving personal or payment data to a company that has had trouble with breaches in the past and instead look to work with firms that have an unstained reputation in regard to client information security.