The risk of reputational damage is a big one, especially for construction firms where the tangible physical risks on sites are all too real. How can you protect your company’s reputation should the worst happen?
Risk is something organisations of all sizes in the construction sector have to face.
Whatever the risk – whether related to the health and safety of employees or in handling succession issues – the management of risk is vital to cement the success of a business.
The risk of physical damage is very tangible – for example, a construction project collapsing mid-build. While remedying the fault may be lengthy and costly, it can be more difficult to manage the damage to the firm’s reputation as a result of an accident.
Number one concern
Deloitte’s recent global executive survey on strategic risk reported that reputational damage was the number one risk concern for business executives around the world. This was echoed by Aon’s Global Risk Management Survey 2015, which placed damage to reputation and brand as the number one risk facing companies.
A catalogue of recent corporate challenges has given business managers good reason to take the issue on reputation risk seriously. BP suffered a 29 per cent plummet in the value of its shares and a US$53.5bn exposure to claims in the wake of high-profile fraud investigations following the 2010 Deepwater Horizon spillage in the Gulf of Mexico.
“Deloitte’s recent global executive survey on strategic risk reported that reputation damage was the number one risk concern for business executives around the world”
Steel specialist Severfield was very vocal about how it was working to protect the company’s reputation after it had to shell out £6m to repair bolts that fell from the Leadenhall Building, the construction of which it had worked on, earlier this year.
Most recently, the data breach suffered last year by Talk Talk severely dented the firm’s reputation – just a few examples of companies incurring not just pecuniary, but also reputational damage.
Reputation and market value
According to a study by the World Economic Forum, on average more than 25 per cent of a company’s market value is directly attributable to its reputation. It is for this reason that owners and senior managers of construction businesses should make protecting their company’s reputation of paramount importance.
There are several steps that organisations can take in order to minimise reputational damage once an incident occurs.
First and foremost, they need to ensure there is an effective and tested crisis management plan in place. If embedded within the business at all levels, these programmes place the company in a better position to manage a crisis head on and provide strategies for dealing with the reputational risks they inevitably create.
Simple strategies such as the early appointment of a single co-ordinator will avoid misinformation being leaked internally and externally, and create a consistent message and approach to the management of the event.
Swift and decisive action is also essential. Being seen to move quickly to address the situation and being transparent will in turn help protect the company’s reputation and brand. For example, in the days following the ‘Smiler’ rollercoaster incident, the CEO of Merlin Entertainments was visible and personally dealing with all news enquiries. This transparency reflected well on Merlin and will have helped maintain trust in the company.
The early appointment of a solicitor to advise the business will help to protect documentation and the investigation process by legal privilege.
While reactive handling of an incident is one aspect, construction organisations big and small should ideally have in place a robust risk management strategy that anticipates and covers all forms of potential crisis or breach.
This could involve running statistical and behavioural analysis to identify any potential weak points, understanding which parts of their organisation require review and additional support, designing an incident response plan, considering the worst-case scenario, performing best practice analysis and making business continuity plans.
Once the dust has settled, all organisations should take time to reflect and review their handling of the event and take stock of any lessons learned to implement improvements to systems and infrastructure.
Michael Salau is partner and head of construction and environment at BLM