Risk and reputation beyond borders

Risk and reputation beyond borders

Photo credit Cole Patrick.

Earlier this week, the International Public Relations Association (IPRA) published this thought leadership piece I wrote on assessing risk and reputation working across multiple markets.

Risk and reputation beyond borders

Jamal Khashoggi’s killing, and the international community’s reaction pulling out of the Saudi hosted ‘Davos in the Desert‘ last month, has brought sharply into focus one of the reputational risks of conducting business beyond borders. Many organisations are accountable to their public, shareholders or investors and have clearly stated values and stated corporate responsibility.  The initial handling of Jamal Khashoggi’s disappearance and then confirmed death goes against widespread stated values; amplifies transparency and trust issues; and puts the spotlight on allegations of human rights abuses. Furthermore, the repercussions are ongoing – it is an evolving story.

First and foremost, any organisation considering, entering or developing a new market or presence, investment opportunities or a presence beyond domestic borders must consider if it is a good idea for global business partnerships.  This will be considered as part of an initial risk assessment, a component part of strategic planning.  Where risks are identified, mitigation is considered.  Where the risks are too high, invariably the strategy is re-considered. Where the risks are manageable, the mitigation includes communication elements, particularly with sensitive, complex or controversial subject matter.  This is normally in the communications plan for that particular market, product or activity and will sit alongside the marketing plan.  This is essential to manage the overall PR operations, develop a successful partnership, raise brand awareness, cultivate trust and build reputation.

Assessing reputational risk

The Khashoggi case has demonstrated why reputational risks need to be identified and understood.  So what are these risks that can impact reputation? There will be many more, contingent on the country, but here are my top three:

1. Security is the most fundamental.  Most of us take this for granted, but if a country or region is experiencing any kind of instability or conflict, civil or military, the risks are clearly higher.  For some sectors, this is normal, for example private security services for employees, infrastructure in a recovery situation.  Typical reputational risk elements in high-risk environments focus on duty of care for employees, cost of operations, surety of investment for shareholders and wider geo-political dynamics.

2. Political regime and climate is a significant risk factor, as we are seeing with the Jamal Khashoggi case and KSA.  Usually the media landscape reflects the political regime so this is also an important consideration.  The media is a barometer of how society is informed, influenced or oppressed, as well as the values of the government in office.  If the values do not correlate, then there is a reputational risk.  It is interesting to note that in September, the Policy Institute at King's College London published a report[1] examining the costs and benefits of UK-Saudi Arabia co-operation.  One of three findings covered reputation:

The UK appears to be incurring reputational costs as a result of its relationship with Saudi Arabia, while the economic benefits to the UK are questionable.

The simple question during the risk assessment of the political regime is that if there is a reputational cost, is it worth it?

3. Local customs, norms and practices. There are many examples and again, this is contingent on the market or country.  One example is the  ‘wasta’ – an introducer, nepotism or knowing someone of influence.  I soon learnt how wasta works when living and working in the Middle East. Whilst this approach is frowned upon in many societies and not considered ethical, it is deeply engrained and accepted as normal in the Arab world.  An assessment of all local customs and practices is essential not just to navigate business operations, but also to assess if they are ethically acceptable or manageable against their stated values.

One excellent tool to start research for natural and man-made risk factors is the Lloyds of London City Index[2].  It is a useful tool to identify risk in specific markets and cities, thus enabling evaluation of potential impact on reputation.

Preparing the mitigation

As we just don’t know what the future holds, when considering any risk, the natural questions we ask ourselves are:

  • What if?
  • What now?
  • How do I?

Finding the right answers for each respective scenario is essential to mitigate any reputation risk and is part of the risk management process.   Assistance and help for global businesses is often foreign chambers of commerce: a network of government offices to support importers and exporters.  These chambers have expert local insight on mitigation.

On how to mitigate reputation risk, Chris Wren, CEO of the British Chamber of Commerce in Indonesia, offers this advice to anyone developing a presence and brand strategy, and its protection in Indonesia:

“Barriers and challenges now are the same as 20 years ago, but less so.  Key to the success of any brand or business here is evolving and developing key relationships with governments, institutions and regulators.”

This of course is sage advice for anywhere in the world. To facilitate these relationships, a strategic narrative and appropriate messaging should form a key part of the business strategy and communications plan, fully integrated with the sales and marketing collateral.  Communication elements must be prepared to deal with the barriers and challenges, as well as the unexpected and sometimes difficult questions when things don’t go to plan.

Managing barriers and challenges

Things will go wrong or deviate from the plan.  Success is contingent on how challenges are managed. The biggest challenges are macro-economic barriers to trade and its relationship to political regimes around the world.  We are currently witnessing this between the USA and China as they are ratcheting up tariffs and quotas to protect their respective markets. Micro-economic factors have a more day-to-day impact as companies and organisations navigate their way around the various local laws, customs and key relationships in order to get things done and achieve their business goals.

An example of a barrier or challenge at an operational level is customs clearance.  This impacts imported global consumer brands in some markets that have so-called fast-track customs clearance charges. A long lead-time to get products to market is the way to avoid these so-called charges, as the risk of paying may be damaging to the brand and its values. Conversely, the Ritz-Carlton hotel group has seen its brand in the middle of political controversy due to the recent use of their hotel in Riyadh both last year and for hosting the Davos in the Desert.  Parent company Marriot International has seen a slump in share price since the Jamal Khashoggi story broke. Arvind Ganesan, director of Human Rights Watch’s business and human rights division offered his observations:

“Businesses really need to consider what their relationship with the government is and how they can avoid being tainted by its actions.”   

There is no perfect navigation process for managing reputational risk beyond borders - this is as individual as a set of variables and risk factors.  What remains constant are core values, ethics and governance structures.  When these are used in conjunction with the risk management process, it will determine the best approach and mitigation required, and if the benefits outweigh risking hard-earned reputation and trust.

References

[1]  King's College London ‘Security cooperation with Saudi Arabia:  Is it worth it for the UK?’  https://www.kcl.ac.uk/sspp/policy-institute/publications/uk-saudi-arabia-security.pdf

[2] Insurance market Lloyds of London ‘Global City Index’ https://cityriskindex.lloyds.com

Link to originally published article:

https://www.ipra.org/news/itle/itl-296-reputation-beyond-borders-assessing-and-mitigating-risk/

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