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Management of Reputational Risks: from Prevention to Creating Value

Reputation & Reputational Risks

Management of Reputational Risks: from Prevention to Creating Value

In the current environment, management of business risks became a strategic issue for all companies. Today most of the organisations are incorporating reputational risks in their Enterprise Risk Management Systems (ERM).

30 experts from Spain’s largest companies were convened by Corporate Excellence for an in-depth discussion of this topic. Speakers of this high-profile event included Tomás Garicano, lecturer at the IE Business School and the Director of IE’s Corporate Governance Centre, Helena Redondo, Partner for Sustainability at Deloitte, and Alberto Andreu, Chief Reputation & Sustainability Officer of Telefónica. All speakers emphasised the importance of incorporating reputational risks in the risk systems and the need to view them as an opportunity for creating value.

According to Garciano, “management of reputational risks is vital for companies. Even though most of the companies still do not account for reputational risks in their financial statements, in the next few years we’ll see this trend”. In her turn, Redondo explained that in order to achieve an integrated approach to risk management, it is recommended to follow the COSO model and emphasised that “the implementation of an efficient Risk Management system is a key tool for managing the entire organisation”. Key advantages of this approach are creating value, improvement of operating results, reputation and effective governance. 

A practical perspective was added by the presentation of the Telefónica Case, delivered by the Company’s Chief Reputation and Sustainability Officer. For more than a decade Telefónica has been integrating reputational risk in the Enterprise Risk Management System. According to Andreu, Telefónica implemented COSO, included the reputational risk in the global risk map of the Company and is currently trying to introduce some innovations: correlate the reputation metrics with other indicators (e.g. satisfaction of customers, employees and suppliers), which is expected to improve the Company’s capacity to anticipate and prevent risks.