Detecting Your Reputation Risks: Risk Matrices and Analysis for Social Media

How can you better detect and assess the risks that may threaten your organization and its members? Among all the potential risks, how do you position the risks related to your company's reputation? How, with the multiple messages and information posted on social networks, can you sort out the risky data from those that present a low threat? We will try to present the methods and tools that will help you in this challenge.

 

1. Risk Detection: An Evolution of Major and Emerging Risks

Risks are generally classified into six major categories. This is notably the approach of insurance and reinsurance companies which obviously base their activity on risk management and forecasting.

• Natural and environmental hazards: landslides, cyclones, storms, earthquakes, avalanches, heat waves, forest fires, floods, and volcanic eruptions
• Technological risks: directly and unequivocally linked to human activity, they include industrial, nuclear, biological, computer, and internet risks (cyber attacks, data theft, uncontrolled algorithms, etc.)
• Economic risks: disruption of demographic balance (aging of the population), environmental degradation (inflation, unemployment), and overly powerful economic factors
• Societal risks: migratory flows linked to conflicts and climate change, increasing social tensions, and deterioration of mental health
• Regulatory risks: complex and restrictive regulatory environment, fines and sanctions, increased technicality for small organizations
• Political risks: at national, European, and international levels. Government instability, local conflicts, protectionism, geopolitical and economic problems

 

Some are qualified as major risks with a low frequency and a high level of seriousness. Risk management tools are used to characterize risks according to the probability of occurrence and the severity of the impact if the event occurs.

But more and more, according to the events of the last four years, our organizations, companies, and environment have to face a systematization of risks such as climate risks, cyber risks, health risks, and even war risks. The levels of severity and frequency are sometimes profoundly altered. Thus, the planet has seen an increase in environmental and climatic risks and events in recent years. According to the World Meteorological Organization (WMO), the number of meteorological disasters has increased fivefold over the last 50 years. 

In relation to the economic organization (company, association, NGO, public institution), the risks can be categorized as follows:

• Financial risks: market developments, currency risk, borrowing capacity, credit risk, and liquidity risk
• Operational risks: supply chain malfunctions, equipment and material failures, energy costs, and IT risks
• Strategic risks: market disruption, uberization, changes in customer demand and consumption patterns, competition, and regulatory changes
• Legal risks: regulatory violations, non-compliance with rules (health, private data), lawsuits, and fines.
• Environmental and social risks: natural disasters, climate change, social and political unrest
• Reputational risks: negative publicity, image damage, and customer dissatisfaction, resulting from the failure to manage other risks or from the actions of stakeholders

 

2. Brand Reputation Risk

Reputation risk is a risk that stands apart. Relatively recent in comparison to other risks, it has increased significantly since the advent of Web 2.0 or the social web, which encourages visibility and potentially strong dissemination of the words of any stakeholder. Thus, if the problems of bad reputation are old, the use of social media channels as axes of reputation dissemination has developed the risks of a digital reputation for some organizations.

 

How to Classify Reputation Risk?

This is, in fact, a complex question. Obviously anthropogenic in nature, this risk is considered by some specialists and practitioners to be the starting point for many other risks, particularly economic ones.

Some risk managers consider reputation risk as a transversal axis, making it possible to correct everything else (i.e. the impact of other risks), rather than as a risk in itself.

Reputational risk is indeed transversal because its origin and potential impacts are multiple. The origin can be linked to health risks, managerial shortcomings, organizational problems, customer risks, and governance. The impacts can be on finances (sales, borrowing capacity), the brand image, people (resignation), human resources, or customer base. Loss of revenue and loss of customers are seen as the main problems that organizations face as a result of reputational damage because it directly affects the survival of the company.

The impact of reputation damage as seen by risk, marketing, and communication professionals

That said, reputation risk can be defined as follows: reputation risk describes the risks related to the image of an organization or a company. They have consequences in terms of financial risks (i.e. loss of turnover, customer base, decrease in sales, loss of markets, loss of stock market valuation, etc.). They are generally the consequence of poor management of other risks or issues, such as:

• health risks
• social risks
• environmental risks
• ethical risks
• product risks 

 

Reputation Risk within Other Risks

In order to visualize reputation risk within other risks and their possible interconnections, let us look at this mapping. The risks that constitute reputational risk can be the consequence of poor management of operational, health, or regulatory risks. For example, food companies in the dairy or frozen food sector have suffered months or even years of negative reputations after the health crisis linked to the infection of their production chain. Let's also remember that governance risks can have a strong impact on the reputation of the organization, as was the case for Uber or, more recently, for Twitter Inc.

Typology of major risks. Source: Digimind

 

 

3. Risk Detection and Management: Matrices and Tools

Let's imagine that you are now experiencing a major reputational crisis: information is circulating on social networks falsely questioning the hygiene of your food production chain. Hundreds of pages of fake news criticizing your company and its managers, inventing negative facts, are produced and published on blogs and then relayed by a core of activists on social media, particularly virulent and organized.

As in any crisis, ideally, one should have prepared beforehand for the possibility of such a crisis. To do so, beforehand and in parallel to the tools for monitoring conversations and messages on social media (monitoring and social media listening), a certain number of tools and methods can be useful.

The proposed tools and analysis keys aim at preparing risk management and detection with diffusion and propagation on the different dimensions of the social web: social networks, social media, blogs, news, and online press, consumer opinions, activist sites and petitions, NGOs, etc...

 

Risk Matrix

The risk hierarchy matrix

 

Using, for example, the mapping of major risks presented earlier, list all the risks that could potentially affect your organization.

It is therefore advisable, as a group, to multiply the points of view and expertise by listing your main operational, economic, market, regulatory, customer, health, financial, and technological risks.

For each risk, the risk hierarchy matrix should assign a degree of probability (from very likely to unlikely) and severity (from very serious to low).

For instance: Operational risks > Lack of truck drivers with C1 license > Probable x Severe.

 

Risk types

 

Your risk assessment team, whether or not it is led by a risk manager, must include members of every department concerned: Co-Director, HR, Finance, Production, Supply Chain, Marketing, Sales, R&D, Legal and Regulatory, Quality, Safety, etc. They must be consulted for these preliminary assessments, even if the day-to-day risk management is ultimately handled by another function.

 

Operational risks matrix

 

📌 This risk matrix is one of the elements to build your monitoring and social media listening dedicated to risks: each type of risk must be subject to informational monitoring and categorization of the information and data collected, in order to be alerted to new risk factors, their evolutions, and trends. Examples: new regulations, a new type of bacteria, the tension on the production of raw materials, on a type of business, proven cases in organizations, etc.

 

Stakeholder Matrix and Origins

In order to detect and evaluate as accurately as possible the reputation risks propagated on the social web, it is necessary to analyze the types of origins and potential stakeholders.

📌 Just like the risk hierarchy matrix (I), these two upstream analysis tools allow you to prepare your monitoring and social listening for "risk detection".

What Are the Stakeholders in Your Reputation? 

Stakeholders include all individuals, media, and organizations that can potentially take part in the construction of your reputation via their messages and actions on social networks and the web, whether or not these are an extension of actions in reality. They will contribute to the reputation of your brands via positive or negative messages. The types of stakeholders can be very numerous depending on your size, your market (B2B, B2C), the nature of your products (high tech, pharma), and your global reputation.
 
In order to list all these stakeholders as exhaustively as possible, you must first ask yourself the question of the possible origins of the reputational risks. These stakeholders may be external, they know you by name, intermediaries, they know your products or services, or internal, they know you from the inside.