Reputation risk is the second-biggest threat facing New Zealand companies, yet many do not see reputation as a prime asset, according to research.

A study by Senate Communication Counsel and TNS found that 85 per cent of NZ executives claim to be active in reputation risk management and enhancement. But it also revealed “a glaring disparity between organisations’ apparent concern for reputation risk and their apparent unwillingness to check what important stakeholders are thinking”.

In addition, only 42 per cent of those polled said reputation risk management is well understood in New Zealand.

The top factor impacting reputation, according to the study, is failure to deliver minimum standards, followed by exposure of ethical practices, poor crisis management, non-compliance and industry specific factors.

However, NZ executives did not see sponsorship programs or how the public perceives the treatment of employees as significant to their reputation. The lessening importance of sponsorship reflects a move towards more substantive measures on reputation, a trend that has gathered pace in Australia, particularly in terms of corporate social responsibility (CSR). “CSR gets really bad press, and deservedly so, if it is treated as a program that is run out of the corporate affairs department which is some kind of ‘makeup’ for the company and has no actual relevance to the way the organisation actually operates,” Sam Mostyn, group executive, culture and reputation, at Insurance Australia Group told Risk Management last year.

Although the NZ study said poor crisis management has a major impact on reputation, crisis management and reputation risk management should not be confused. “However, crisis and issues management, should not be confused with reputation risk management, according to some. For reputation risk to be truly managed, its cultural levers must dig deep into organisational DNA, with well-defined outputs and benchmarking,” Mosytn said. “I think there is an increasing focus and understanding that you can’t manufacture a reputation and therefore corporate affairs departments and communications divisions are not the home of your reputation.”

Despite the focus on reputation, the top risk for NZ executives is human capital risk, mirroring other recent research from Aon and Marsh that named human capital risks as among the major threats facing companies. Reputation was second, with IT, regulation politics rounding out the top five.