Managing reputational risk in 2023: it's not 'trust', it's trustworthiness that matters
By Rod Cartwright, Principal, Rod Cartwright Consulting and Blurred Cohort Member
A few weeks ago, I released on LinkedIn a report called ‘Trust, Risk and Resilience: Where are we Now and Where Next?’. In it, I summarised and analysed the 280 pages contained in the five key, global, turn-of-year reports on trust and risk.
On the one hand, the analysis revealed a wall of interconnected economic, geopolitical, environmental and structural risks – together contributing to a deepening sense of political polarisation, social division and economic inequity. On the other, it suggested a widespread belief that an ESG-centred approach to stakeholder capitalism holds the key to our surviving or even thriving over the years ahead.
Beyond many kind words about the report, the response to the 'TL;DR' summary and overview of each document, ten overall conclusions and ten practical recommendations was fairly uniform: “wow, we’re kind of screwed!”.
People were concerned not only about the sheer scale and diversity of the risks facing the world, but also by the extent to which many organisations – and CEOs in particular – feel unprepared for the trust-eroding organisational crises lurking round every corner. Put another way, many organisations still lack the systematic approach to risk mitigation and crisis preparedness on which resilience hinges.
So what should be the organisational answer to managing reputational risk in today’s 'RUPT' environment? With the report suggesting widespread consensus on the need for business leaders to take an active position on major societal issues of the day, a natural response is to ramp up corporate action on societal and environmental issues – the ‘E’ and ‘S’ of ESG.
Quite possibly. But as Blurred co-founder, Stuart Lambert, argued in a (frankly brilliant) recent blog post, “good corporate governance is required before you can even think about work to address environmental and societal impact and risk … it is the glue that binds everything together”. Or to borrow from a comment by his colleague, Matt Peacock: "The G provides the framework within which companies assess and mitigate their most material E and S risks".
Which raises a fundamental question: is the trust which stems from the communication of good social or environmental citizenship really the inoculant to reputational crises we are led to believe? Or should we be focusing on something far more centred on underlying behaviours, hard-wired into the organisation by good governance – trustworthiness?
As a specialist in issues, crisis, risk and resilience, I see senior executives all-too-frequently think that ‘PR crises’ are most likely to stem from uncontrollable externalities. In my experience, that is almost always wrong. Indeed, as anyone who has experienced anxiety or depression will tell you, it is not actually the external stimuli that do the damage – it is our reaction to them.
Reputational risk is no different. There is rarely, if ever, such a thing as a 'PR crisis'. Rather there are organisational crises stemming from a combination of structural, operational, behavioural, decision-making, governance and cultural factors (aka governance!), which manifest in the organisation's public relationships and resulting reputation.
If companies are to engender the trust they believe will help protect them from the fallout of reputational crisis, they need to earn that trust. Put another way, they need be trustworthy – worthy of their stakeholders’ trust through the fundamental corporate behaviours that are driven by good governance.
Rather than obsessing with externalities you have little hope of controlling, think rather about what you can influence (at least to some degree) in your own back yard. In other words, think of trust as a constantly evolving by-product of fundamental organisational governance and behaviour – not a free-standing end in itself.
Backed by extensive research, this is an approach espoused by Basil Towers of Tie-Stone, who distinguishes between ‘foundational’ and ‘competitive’ trust, and argues that “to consider only trust is to look at the symptom and not the cause. Only by being trustworthy can we earn lasting trust”.
The ‘Trust, Risk and Resilience’ report holds numerous clues as to what being truly trustworthy in 2023 might look like in practice:
Place the highly personal, human impact of the cost-of-living crisis on employees, customers and communities at the heart of your strategy.
Be fully alive to the increasing ‘intersectionality’ of risk (including geopolitical conflict) and prepare accordingly, as a critical element in assessing key risks and opportunities.
Realise that the existential threat posed by the climate emergency is the issue of today and tomorrow, making proactive involvement in this central challenge non-negotiable.
Remember that recruiting, retaining and engaging a genuinely diverse, inclusive workforce will be a hallmark of those organisations that survive and thrive.
Only speak out on major issues of the day when you can do so credibly – in line with your underlying business, reputational and brand strategies.
Never forget that risk preparedness is a team sport, involving all key business functions and requiring the stress-testing of responses to real-world scenarios at a human – as well as operational – level.
A reputational crisis is only ever a turning-point, potentially as rich in opportunity as risk. How you emerge depends on your fundamental behaviours and relationships as you go in, and how you behave and communicate while there. Trust may well be beneficial in lightening the load. But just imagine the power of deep-seated trustworthiness in managing the crisis as it evolves or (heaven forfend!) avoiding it happening in the first place. That is surely something to think about.