Rebuilding Corporate Reputations in Financial Services

The corporate reputations of Banks, Securities Firms and Insurance companies have taken a pounding over the past 18 months due to real and perceived recklessness, greed and incompetence. If we are to have functioning capital markets and long term growth, the credibility and stature of the industry will need to be restored quickly.

Unfortunately, the phenomena of ‘industry effects’ – the actions of one firm tarnishes an entire industry – is unlikely to improve the sector’s image in the short term unless all financial institutions begin to take tangible steps to restore their reputations in the eyes of key constituencies.  Without action, companies will have difficulties rebuilding shareholder value and coping with intrusive legislative meddling, increased regulation and consumer antipathy.  Additionally, an industry seen as lacking in ethics and credibility will be less able to input on critical public policy and regulatory issues like protectionism, banking reform and national security. What can FS leaders do to rebuild confidence?

Own the Problem

Given the recent pay controversies at Goldman Sachs, AIG and elsewhere, one can’t help but think that many leaders see current reputational problems as transitory in nature.   More worryingly, some executives may still be wedded to pre-meltdown thinking or could be suffering from some form of cognitive dissonance.  Fundamentally, FS executives must acknowledge and accept that today’s reputational challenges are more problematic than anything experienced since the Great Depression.

Manage Reputations Strategically

Given the financial and brand risks, reputational issues must become part of the Board’s mandate and purview.  Previously, these issues were left to marketers and PR agencies who often responded in a short term, ad hoc, and defensive manner.  Furthermore, reputational impact should be taken into consideration for all major initiatives.

Recognize the Dynamic Environment

Today, financial institutions must function in a highly charged, fast moving and almost predatory environment populated by hundreds of Web-based “citizen journalists,”  a global and participatory media, thousands of powerful non-governmental organizations and social media networks that connect hundreds of millions of people.   Together, these actors are using publicly available information to rapidly scrutinize a large number of companies (and their leaders), rendering traditional image-building PR tools and advertising less effective in addressing image issues.  Furthermore, the rapid dispersion of bad news to the mainstream can catalyze hitherto unengaged people into action, potentially providing the impetus for regulatory or legislative change. 

Know Your Stakeholders

Leaders need to better identify and understand the needs of each stakeholder, both direct ones like consumers & regulators and indirect ones like NGOs & bloggers.  Part of this research effort should involve understanding consumers and activists from a social/attitudinal perspective.  Furthermore, companies could improve their stakeholder understanding and influence by going beyond traditional PR approaches to mechanisms and forums that promote ongoing engagement.

Be Proactive with Your Message

In rebuilding their reputations, firms should heed the old adage that bad news drives out the good.  Therefore, companies need to proactively engage stakeholders in an integrated, yet customized, fashion.  For example, the CEO should lead the way, both publicly and privately, as a plain-speaking statesman for their enterprise.  Senior leadership should not shy away from debating the issues or communicating their internal policies on a variety of hot-button issues including executive compensation, risk management and their code of ethics.  Addressing stakeholder concerns up front through dialogue (as opposed to a monologue) will help reduce mutual hostility and foster trust.   

Now more than ever, it will be clarity, truth and engagement—not spin—that rebuilds and maintains strong reputations in FS.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.


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