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5 Reputational Risk Predictions for 2019


Drawing upon insights from the upcoming SAI Global Reputation Trust Index, we explore the 5 critical reputational risk management themes we predict will prevail in 2019.

2018 was undoubtedly a year of movement in the global risk landscape. Disruptive factors such as cybersecurity, data privacy, imperilling regulatory change, and an upsurge of socially conscious consumers – not to mention growing consumer and employee activism – accelerated and amplified threats to reputational risk.

Life is unpredictable for the most part, but one thing is certain – business owners will face new and emerging challenges. And if 2018 is anything to go by, the threat landscape to business is growing increasingly advanced, pervasive, and unpredictable. No organization is immune to reputational threats like cyberattacks, natural disasters, rampant data exposures, or senior execs talking out of turn on social media.

Armed with data from our second annual Reputation Trust Index, we're highlighting five trends in consumer trust to predict what will be major disruptive forces as we move into the new year and beyond.


1. Prediction: Organizations will be forced to adopt a more rigorous cybersecurity posture and implement robust third-party risk management 

With the average global cost of a data breach standing at an estimated US $3.86 million, cybercrime is exploding and eroding consumer trust as a result of data breaches is at an all time high. 

According to respondents to our trust index survey, 59% say they are less likely to trust a company that has had a data breach. Unsurprisingly, financial, reputational, and increased C-Suite accountability for cyber breaches will continue to drive Board focus on cybersecurity into 2019.

But in today's fast-paced world where maintaining vigilance against disruptive cyber-attacks is often a game of whack-a-mole, ensuring cyber resilience is not an easy task. From information security controls to scenarios and war games, data protection and fraud authentication processes, CISOs and their teams will continue to have sleepless nights ahead. 

As a result of the escalating risk and fallout, we predict organizations will accelerate the adoption of more comprehensive and strategic cybersecurity postures and implement increased robust third-party risk management programs in 2019. By doing so and ensuring that they are applied to the entire network of partners, an organization can effectively manage and mitigate reputational risk.


2. Prediction: Consumer trust in data privacy is in free-fall in the post-GDPR World

The proliferating nature of high-profile data breaches and data handling scandals, such as the Facebook-Cambridge Analytica data debacle, and rollout of GDPR has seen a groundswell of a new consumer activism. Consumer attitudes to data privacy and protection having changed significantly. Amidst growing discomfort among consumers about exchanging personal data with industry, consumers now feel, and are, empowered.  

If you look at the backlash towards Facebook after the scandal broke, it was severe – US$70 billion of the social media giant's market value was wiped out in ten days. While its share price recovered, the reputational damage is still being felt. According to our research, one in three people consider Facebook and other social networks to be the least trusted industries for online personal data. To put this into perspective, the financial services and healthcare industries – both of which have been blighted by data breaches during 2018 – scored 11% and 8% respectively. This illustrates that data security is more than just a compliance issue, but one of trust and reputation. 

As we move into 2019, we expect to see a greater focus on compliance with GDPR and the broader issue of data security, governance and strategies addressing and mitigating the risks. 

What we expect to see during 2019 is organizations moving from simply navigating today’s reputational threat landscape to creating a resilient and transparent organization that is poised and ready to overcome inevitable reputational obstacles


3. Prediction: Organizations undergoing increased scrutiny of cultural and ethical transformations will look to modern and mobile learning to affect change

While harassment in the workplace and society at large is not new, the pressure for this to change has never been greater. The corporate scandals we've witnessed over the past few years, such as the Google employee worldwide walkout and the exposure of sexual harassment behaviors at large and powerful Silicon Valley firms are creating a new level of awareness for a modern approach to learning, culture and employee communication. 

The issues we continue to see around such events are often systemic, tend to lead to some type of domino effect, and end up costing too much in terms of lost reputation, brand identity, and trust. According to findings from our research, more than half of respondents (57%) state that they were least likely to trust an organization that had allegations of sexual misconduct in the workplace. Further, 62% stated they wouldn't trust an organization that behaves unethically towards employees and suppliers.

Given this, it is easy to understand why corporate culture and ethics are no longer being viewed as a side project but as a corporate imperative to future-proof an organization against reputational damage. However, organizations cannot solve ethical risk challenges by simply introducing a set of corporate values. Though this has become a common way for organizations to show good intentions, consumers are realizing it has little to do with their ability to actually be ethical. If you look at the organizations that have gotten into trouble over the past years, most have had nice values, yet those values didn't stop them from engaging in egregious misconduct. 

What we saw throughout 2018 was organizations actively engaging to protect their ethical core by moving beyond simply introducing a set of corporate values and putting in place the tools and solutions to manage this acceleration in ethical risk. And while organizational culture transformations are already in full swing, we predict 2019 will be a period of refinement as organizations smooth over the edges of new HR and culture strategies and look to implement modern approaches to learning and employee communication. 


4. Prediction: Sustainability and transparency will be key ingredients for customer loyalty in the food industry 

More than ever consumers care about ingredient sourcing, labeling and what impact the manufacture and distribution of products has on society and the environment. 

This increased social and sustainable concern is no longer just a characteristic of foodies or wealthy suburbanites. According to findings from our second annual Reputation Trust Index, almost half of people across the globe consider a company's corporate social responsibility (CSR) before purchasing (43%). Further, 18-34 year olds are the most likely to take these values into consideration when choosing to support a brand (49%), signaling millennials are not opening their wallets to company behaviors out of step with their values.

It is vital that customers feel they can trust the quality and integrity of the food they are buying. Some of this desire for information and transparency has been a result of various well-documented food scandals, and, as a consequence, what we are seeing now is an erosion of trust in the food industry. When our respondents were asked which of the following types of company crisis concerned them the most, a surprising 42% of over-55s cited food safety violations in groceries, compared to 31% of millennials. And when asked which industries do you trust the most, only 7% of respondents put their trust in restaurants and fast food industries.

As we move into 2019, we predict the ability to show transparency throughout the supply chain – from 'farm to fork' – will continue to truly be the food industry's biggest competitive advantage. This prioritization for full product transparency will require enormous investment in change, but rather than viewing transparency as a challenge or burden, the industry can leverage the opportunity to identify potential operational improvements, promote good corporate citizenship, reinforce the strength of their brands, and potentially minimize the impact of future reputational events.


5. Prediction: Consumer demand will continue to dictate digital and goods supply chain management

According to findings from our Reputation Trust Index, consumers are demanding greater transparency. In fact, 60% of respondents state that when a company takes public responsibility for an incident, they are more like to regain trust in that company. And 59% of those polled voiced that transparency around how a company notifies its customers of an incident is also a key element to enabling trust to be returned.

This increasingly energized citizenry is driving a new set of rules to manage brands and reputation risk and organizations will continue innovating how they manage both external and internal risks to build sustainable brand resilience. An important component of building consumer trust is showing transparency as a part of all levels of an organization, which is why we predict 2019 will see a greater focus on transparency in supply chain management.

Organizations need to truly know their supply chains – after all, a business is only as strong as the weakest link in its supply chain and the rate of supplier failure is alarming. Shifting to a more transparent way of functioning is a long process with a steep learning curve. But mapping out and understanding the ins and outs of a supply chain, as well as strengthening relationships, increases the resilience of the supply chains and results in a robust network of suppliers who can be trusted and relied upon in the event of a crises. 

Reputation and collaboration are therefore fundamental aspects when it comes to supply chains. Reputation requires organizations to become more aware of the issues around their supply chain and communicate effectively in times of crisis. Collaboration represents a great resource for effective supply chain management. The better organizations are at mitigating – and, ideally, proactively responding to – threats, the better they can protect their bottom lines and their reputation.


Navigating the Hazardous and Complex Trust Dilemma

As global consumer skepticism escalates, consumers are left wondering who is worthy of trust. What we expect to see during 2019 is organizations moving from simply navigating today's reputational threat landscape to creating a resilient and transparent organization that is poised and ready to overcome inevitable reputational obstacles. We see this happening as more organizations shore-up their relationships both internally and externally and look to create greater transparency throughout their operations. By doing so, organizations have the opportunity to improve their operations, efficiencies, and bottom line profits and ultimately sufficiently future-proof themselves. 

Ask our experts how to manage reputational risk across your organization.