Reputation forms a hugely important consideration for businesses, with the World Economic Forum finding that over 25% of a company’s market value derives from this - a figure that is likely to be much higher in today’s society where everyone is much more connected. Handling and mitigating reputation risk should therefore be a priority for businesses, for whom repetitional damage could entail a particularly destructive loss of customers, profit and market share.
Businesses frequently face reputational risks from a variety of sources. a carefully constructed company image can be easily tarnished via data leaks, fake news and the misconduct of senior management.
Business and organisations are now facing greater scrutiny and so another area that can be a risk to a reputation is where there is a regulatory inquiry or suggestions of non-compliance with regulations Today’s regulatory environment is considerably more aggressive than it was many years ago, particularly given the rise of the internet and increasing environmental awareness and sustainability campaigns. This has meant that regulatory inquiries is far-reaching, covering among other things:
Data privacy and GDPR
Corporate wrongdoing and accountability
Environmental protection (for example, reduction and safe disposal of waste).
It is therefore very important for companies to ensure compliance with all relevant procedures and law to safeguard their reputations in this respect.
Many stakeholders use corporate compliance with regulations as an important indicator of a company’s credibility, legitimacy and reputation. Inquiries that indicate failures in compliance not only breach contractual and statutory requirements, resulting in the hefty fines that result from this, but destroy customer expectations and fidelity to the business. Failures can also result in individual accountability measures, with the naming and shaming of senior executives also creating reputation damage for the company as a whole.
It is always preferable to assess and mitigate against risks before they actually occur and trigger a regulatory inquiry. Ensuring regulatory compliance in the first place therefore forms an obvious, yet critical, tool for prevention. It is also important to note in this respect that corporate compliance with regulatory standards not only mitigates the risk of reputational damage but can, in turn, positively influence it – especially where companies are seen to exceed the level of standards required by regulation.
Companies should continually observe, and track, their regulatory compliance, proactively spotting any risky behaviours and seeking professional advice in areas of uncertainty or in need of rectification. A vital part of this positive action also includes having reliable internal communications, which clearly set out what is expected of staff at all levels within an organisation, in relation to conduct, treatment of clients and use of confidential information
It is also helpful, regulation and reputation-wise, to have robust monitoring procedures in place to ensure awareness of what is being said about your company, by whom, and where. A simple tool that can aid individuals and companies in this monitoring task is ‘Google Alerts’. This software is completely free and can send cautionary email updates at chosen intervals regarding chosen key words.
If an inquiry is triggered, it is important to comply with the requests of the regulator. However, it is simultaneously crucial to be mindful of the duty to protect confidential information. In these instances, it is possible to provide documents to a regulator under what is called a ‘limited waiver’. This would mean that the ‘privileged’ nature of these documents is not lost. Where a company is subjected to a regulatory inquiry, providing information and documentation in this way can portray the organisation in a favourable light. However, this is a complicated tactic and so it is always advisable to consult a professional team as soon as you suspect that an inquiry is going to take place.
If you suspect that a regulatory inquiry is on the horizon, you need to be prepared. Having a legal crisis team lined up before there is an issue can ensure that actions are taken swiftly if you ever need them. You may need a team of reputation management lawyers who can work with PR and security consultants to ensure that your strategy is bullet proof. Having pre-prepared statements and letters ready can expediate the process and provide a crucial element of reassurance for companies in times of crisis. You may also need assistance with implementing more sophisticated monitoring techniques in addition to the simple ‘Google Alert’.
Where an inquiry is inevitable, you will need advice on how to ensure you are fully compliant, while maintaining the confidentiality of certain material. Where action is taken by regulators following an inquiry, you will need to get guidance on the right approach to ensure that the most favourable outcome is achieved.
Depending on the issue, it may even be worth investing in a campaign to highlight any positive changes being made in your organisation following the inquiry.
The information on this website is intended as a guide and does not constitute legal advice. Vardags do not accept liability for any errors in the information on this website, nor any losses stemming from reliance upon the statements made herein. All articles and pages aim to reflect the legal position at time they were published, and may have been rendered obsolete by subsequent developments in the law. Should you require specialist advice, tailored to your situation, please see how Vardags can help you.