Reputational Risks In Your Organization - Part 7

Nature of the Organization's Business Operations

Whether an organization manufactures goods, provides services or acts as a distribution channel, the nature of its operations can present exposure to reputational risk. Companies that manufacture food, pharmaceuticals, chemicals, petroleum products or other items that are either perishable, fragile in terms of shelf life, or pose a potential safety risk can experience reputational crises when the products they manufacture are alleged to be defective in some way.

Organizations such as nonprofits or academic institutions experience reputational crises based on other types of events such as financial mismanagement, fraud or workplace violence. As your organization examines the potential for reputational crises within the institution, the nature of what it does to generate revenue needs to be scrutinized.

Some common problem areas include:

Workplace Violence

On the day of the Virginia Tech shooting, one of my best clients asked me to come to his office. He is a senior executive in a large academic institution. He said, Peg, what do you think? I told him that he was the first client I ever had who wanted to discuss the topic! I also told him that his institution was a sitting duck as was every other university in the U.S. Workplace violence is one topic that triggers major denial. It will not ever happen here... Yes it can.

Although Virginia Tech highlighted the risk areas in academic institutions, other examples in the business world are becoming more common. The disgruntled employee who was fired and comes back to his former workplace to wreak revenge on his superiors is now a more common scenario, particularly in a difficult economy. Workplace violence is sometimes the spillover of domestic violence or an irate customer. In most cases, the violence begins without warning and there are often very few options for alerting the entire workplace or law enforcement before the person begins shooting.

Nature of the operations including manufacturing and distribution of products that are either perishable or have a fragile shelf-life including pharmaceuticals, food and the like.

Product safety is paramount to U.S. consumers and regulators. If the product you manufacture or sell is either unsafe or somehow compromised by unsafe ingredients/parts, the ensuing publicity and/or regulatory action can damage your organization's reputation.

Source of raw materials for the manufacturing process are not subject to rigorous quality assurance processes.

The pet food contamination disaster in 2007 stemmed from the wheat gluten ingredient that was manufactured in China. Other instances of lead-based paint being used on toys imported from China have also triggered consumer crises.

Warehousing of products or inventory can subject the products to hazards such as mold, water, excessive heat or cold, or other environmental hazards.

If the organization's products are intended for human or animal consumption, it is important to carefully monitor the storage environment.

Production facilities. How many offices and/or manufacturing sites?

The organization may have exposure due to the number and location of offices or factories. The greater the expanse of the organization, the more opportunity for communication and crisis missteps.

Product design.

The design of a product or products can establish a risk exposure for the organization, particularly if the product is alleged to cause harm to people, animals or the environment.

Transportation and Workplace safety.

The quality and safety of the work environment of an organization can create an area of vulnerability if there have been accidents, injuries or negative attention from regulators such as OSHA. If the organization owns a fleet of cars or trucks, how are employees who drive for the organization screened? Do the vehicles require special licenses? Does the organization conduct random drug testing per US Department of Transportation requirements?

Employees who drive for the organization should be strictly prohibited from driving while using cell phones or text-messaging as is the law in several states. The signage on the organization's vehicles can create vulnerability if the employee is not driving in a safe manner, or is behaving in a way that does not bring credit to the organization.

Depending on the nature of the organization's products, the fleet of trucks or cars could also present the potential for hijacking, theft or other criminal activities either by employees or criminals.


Copyright (c) 2010 Peg Jackson