WEBINAR BrandAgeddon Reputational Risk Resilience And You Nick

WEBINAR Brand-Ageddon: Reputational Risk, Resilience, And You Nick Hayes, Analyst Renee Murphy, Senior Analyst May 7, 2015. Call in at 12: 55 p. m. Eastern time

We work with business and technology leaders to develop customer-obsessed strategies that drive growth.

Every risk type carries reputational impact.

Agenda › Why reputational risk is rising › What this means for the role

Your company’s value is largely comprised of intangible assets today.

Performance is more closely tied to your company’s image Effective use of social media actually improves the market presence and liquidity of companies. According to a study by Reputation Institute, your willingness to buy, recommend, work for, and invest in a company is driven 60% by your perceptions of the company — and only 40% by your perceptions of the products and services it sells. People view and interact with brands as they do other humans, as social actors. © 2015 Forrester Research, Inc. Reproduction Prohibited 7

Risk concerns are shifting accordingly Base: 1, 468 global business and IT decision-makers (1, 000+); Source: December 5, 2014, “Dissecting Global Risk Perceptions And The Effects Of Customer Obsession” Forrester report © 2015 Forrester Research, Inc. Reproduction Prohibited 8

New business priorities amplify this trend Base: 1, 468 global business and IT decision-makers (1, 000+); Source: December 5, 2014, “Dissecting Global Risk Perceptions And The Effects Of Customer Obsession” Forrester report © 2015 Forrester Research, Inc. Reproduction Prohibited 9

Reputation is an even greater concern in the age of the customer Source: December 5, 2014, “Dissecting Global Risk Perceptions And The Effects Of Customer Obsession” Forrester report © 2015 Forrester Research, Inc. Reproduction Prohibited 10

Brand resilience The ability of the brand experience to live up to and remain consistent with the brand promise, maintaining its integrity even in the face of damaging interactions, events, or circumstances © 2015 Forrester Research, Inc. Reproduction Prohibited 12

Coordinate risk and marketing roles ALIGN WITH MARKETING; SET CLEAR PARAMETERS Marketing’s role: Risk’s role: › Define and set the brand vision › Safeguard the brand experience › Build and manage customer relationships › Assure customer trust › Track brand health © 2015 Forrester Research, Inc. Reproduction Prohibited › Track reputational risk exposure 14

Reputation factors heighten the impact and probability of every risk type Greater impact: More value in intangible assets and higher consumer expectations raise the stakes when any risk event occurs. Marketing risk Security risk Sustainability risk Legal risk Financial risk Third-party risk Operational risk © 2015 Forrester Research, Inc. Reproduction Prohibited Higher likelihood: New business dynamics proliferate the brand, increase transparency, and reduce control. 15

Corporate risk managers are not addressing reputation © 2015 Forrester Research, Inc. Reproduction Prohibited

Reputation is hidden in other risks © 2015 Forrester Research, Inc. Reproduction Prohibited 18

Reputation is at risk Risk Impact Risks owner Product recall Financial operational regulatory reputation Finance operations compliance Reduction in workforce Financial operational reputation Finance human resources Supply chain problems Financial operational reputation Finance sourcing/vendor management Security breach Financial operational regulatory reputation Security © 2015 Forrester Research, Inc. Reproduction Prohibited 19

Reputational risk assessment workflow Integrating reputational risk management into your current risk process Document impacts Identify risk Document risk Assign risk Document treatment of risk Mitigate risk Monitor risk Assess risk Document reputational impacts Document treatment of reputational risk Mitigate reputational risks impacts

Impact severity depends on reputational attributes Risk (industry) Close competitor? Easy to leave? Company size? Reputational impact score Automotive Manufacturing 7 5 2 6. 75 (medium/high impact) Retail 10 10 5 8. 0 (high impact) Oil and gas 5 0 1 3. 0 (low impact) Healthcare 10 7 3 7. 0 (high impact) Impact rating of 1 to 10 (1 being negligible impact and 10 being catastrophic impact) Company size — the larger your company, the smaller the impact number. Incident management — the better you are, the lower the impact number. Impact rating score is an average of the four attributes. Scoring (0 to 2 = low impact; 3 to 6 = medium impact; 7 to 9 = high impact; and 10 = catastrophic impact) © 2015 Forrester Research, Inc. Reproduction Prohibited 21

Reputational Impact by Industry Automotive Manufacturing Oil and Gas Production Retail Banking Healthcare Telecommunications Airlines Education Entertainment Food Production Hotels, Casinos, Resorts Mining & Crude Oil Production Toys and Sporting Goods Utilities - Gas and Electric Grocery Motor Vehilces, Parts © 2015 Forrester Research, Inc. Reproduction Prohibited Reputational Impact Score 5 3 8 5 5 4 6 5 6 4 7 3 7 2 6 6 22

Reputational Impact Score Risk Impact Risks Owner Impact Score Product Recall (Automotive) Financial Operational Regulatory Reputation Finance Operations Compliance 5 Reduction in Workforce (Airlines) Financial Operational Reputation Finance Human Resources 6 Supply Chain Problems (Retail) Financial Operational Reputation Finance Sourcing/ Vendor Management 8 Customer Security Breach (Oil and Gas Production) Financial Operational Regulatory Reputation Security 3 © 2015 Forrester Research, Inc. Reproduction Prohibited 23

Build three lines of defense model Brand resilience steering committee Brand experience and marketing strategy Direct and indirect marketing Customer service Brand health measurement Customer experience Customer intelligence Risk monitoring and brand protection Employee engagement Human resources Crisis management Public relations Technology management Security and privacy controls Compliance and risk management First line Customer touchpoints and brand exposures that form impressions and public perception Second line Reactionary engagement and internal functions that direct the first-line strategy Third line Internal functions to monitor the efficacy of the first two lines and to remediate risk events when prior efforts fail

Recommendations 1. Prioritize risks that have the greatest connection to your brand’s North Star. 2. Pivot your strategy as your reputational risk environment evolves. 3. Reassess your brand resilience after any reputational crisis occurs. © 2015 Forrester Research, Inc. Reproduction Prohibited 25

Best Worst Yes, it matters © 2015 Forrester Research, Inc. Reproduction Prohibited 26

Thank you Nick Hayes nhayes@forrester. com Twitter: @nickhayes 10 Renee Murphy rmurphy@forrester. com