When things go wrong in the realm of corporate reputation, the focus of attention – rightly or wrongly – tends to fall on the corporate board. Indeed, the roles and responsibilities of board members have been increasingly in the spotlight in recent years, and more attention has been given to the role of the Non-Executive Director (‘NED’) since the Financial Crisis. NEDs are in post to hold the Executive Team to account and are held up to be the guardian of good corporate governance, but they also have a significant role to play in reputation management – particularly when it comes to reputational risk.
Traditional risk assessment methodologies often focus on the assessment of ‘likelihood’ and ‘impact’, but the rise of ‘always-on’ digital media has led to a third factor – ‘velocity’ (the speed by which risks can get out of control) – in assessing the risk to reputation, that most valuable of corporate assets. Alongside this, shareholders and other key stakeholders have increased expectations and demand greater confidence in how governance activities are undertaken and risks are managed. Boards must cultivate trust in their ability to be on top of strategic and operational risk areas, and resilient organisations are looking to strengthen their crisis management capabilities so that they can respond quickly and directly to any major incident. Roles need to be defined, procedures communicated, and scenarios rehearsed.
Against this backdrop, NEDs can play a pivotal role. Ensuring emerging reputational risks are on the radar, and maintaining line of sight over potential operational risks, are key to the NED’s role – and must be proactively engaged with from day one, if not before, as part of their own due diligence and interview process.
Starting to elevate this debate and highlight these issues is exactly why we collaborated with Infinite Global on our new report, The Independent Voice: Corporate Reputation and the Role of the Non-Executive Director. Unsurprisingly, more than half of respondents agreed that advising on reputation management was either a significant, or central part, of the job as a NED, and the majority of NEDs are confident that they have the skills required to take on this role. However, around 30% feel only partially prepared and, with scrutiny of board activity increasing and the communications landscape rapidly evolving, the appropriate balance of training and personal development is required to ensure NEDs stay at the top of their game.
What is clear is that while the CEO and Executive Team have day-to-day responsibility for managing reputational risks, the NED needs to advise, support and challenge them to help protect and enhance corporate reputation. They must bring their broader business experience and ability to the table, and make their independent voice heard in the reputation conversation.
Click here to download the full report ‘The Independent Voice: Corporate Reputation and the Role of the Non-Executive Director’
Louis Cooper, CEO of the Non-Executive Directors’ Association