Social media has given consumers a global public platform to hold brands accountable for their missteps and unethical conduct. It takes a single tweet or YouTube post to mobilise like-minded consumers and activists in online campaigns to call out offending brands.

It is therefore ironic to see the implosion of Twitter as a consequence of its new CEO’s dictatorial management style. According to MIT Technology Review, “Twitter may have lost more than a million users since Elon Musk took over”. The company has also laid off half its workforce, with more calling it quits due to Musk’s hard-line approach.

It takes years of considerable effort and resources to build up a brand’s reputation but mere minutes to destroy its hard-earned credibility. It is therefore imperative for CEOs to take brand risk management seriously in our digital and socially-driven world.

This article will discuss the importance of branding in purchase decisions and the growing importance of brand risk management in the current information age, before diving into the five risk management measures every CEO should take to protect their brand.

The Importance of Branding in Purchase Decisions

Unless you’re operating in a niche segment where you specialise in a unique product or service, chances are your customers have a multitude of options to choose from. Having a clear identity and brand positioning allows your brand to stand out from your competitors. It gives consumers a compelling reason to choose you.

“A brand is the set of expectations, memories, stories and relationships that, taken together, account for a consumer’s decision to choose one product or service over another.” — Seth Godin

What Does Your Brand Say About You?

Every aspect of your brand identity says something about your business: from your logo to your website design to your product/service to the customer journey. The most successful brands ensure a coherent brand strategy across their visual identity and customer touchpoints in order to convey a consistent and memorable brand image.

Effective branding can evoke a number of emotions in the audience: from creating desire and intrigue to prompting urgency for action and more.

Let’s take Coca-Cola as an example. From its uniquely shaped bottle that epitomises authenticity to its distinctive red ribbon-like logo, Coca-Cola has cemented its position as a best-selling beverage through carefully crafted brand messaging and creative campaigns. Coke doesn’t sell sodas, it sells ‘happiness’ and the idea of enjoying life’s simple pleasures.

Brands with a clear set of values and a meaningful story will attract like-minded consumers with mutual beliefs and viewpoints. However, even the most successful brands are vulnerable to reputational risk. Recent years have seen social activism gain traction, partly driven by the pervasiveness of social media and partly because of an enlightened younger generation of consumers.

Trust & Authenticity: Is Your Brand Living Up to Expectations?

A 2022 Consumer Research Report by Salsify highlighted findings that 46% of U.S. consumers said they would pay more for brands they trust, a 30% increase from 2021.

Thanks to the abundance of easily accessible information online in the form of customer reviews, Quora discussions, and personal blogs, consumers today are far more discerning and educated in their purchase decisions.

It is no longer enough to provide a high-quality product or service experience; brands these days are held to much higher standards such as socially responsible conduct that prioritises the welfare of their employees, consumers, and the environment. Modern consumers, especially Millennials and Gen Z consumers, expect brands to live up to their carefully crafted brand identities and values.

Besides trust, authenticity has also emerged as a key factor in purchase decisions, as reported in a Stackla study on Post-Pandemic Shifts in Consumer Shopping Habits. Amongst the 2,042 consumers across the U.S., UK, and Australia surveyed, 88% of consumers cited authenticity as a deciding factor for brands they like and support.

This makes brand credibility imperative for businesses if they wish to remain relevant and competitive for the foreseeable future. Risk management is therefore essential to manage and minimise potential threats to a brand’s reputation.

Why is Brand Risk Management Important?

Australia’s 2022 Online Shopping Behaviour Report by Savvy finds that the online shopping boom due to the pandemic is here to stay, with 5.4 million Australian households shopping online each month, a 39% increase from 2019.

With consumers spending increasingly more time online, be it to consume content, gather information for purchase decisions, or socialise, brands have never been more vulnerable to negative reviews and mishandling of online customer interactions.

It only takes a few negative customer reviews and publicly posted complaints to influence public perception of a brand’s reputation, making reputational risk a real threat for any company with an online presence.

While social media allows brands to directly engage with consumers and provide personalised customer service, if these interactions are not handled with tact and finesse, it could backfire on businesses in a major way and amplify the brand’s shortcomings instead.

This makes brand risk management critical to ensure brands reap the benefits of the open, global market the Internet provides while minimising their exposure to reputational risk.

5 Risk Management Measures to Protect Your Brand

Here are five simple but effective risk management measures every CEO should take to protect their brand:

Ensure Impeccable Customer Service

How you handle customer service will determine whether your customers sing your praises or leave scathing reviews on your social media profile, or worse, tell their friends and families to refrain from purchasing your goods or services.

In today’s social media age, communicating with customers via online comments or direct messaging is a convenient and efficient way to address their concerns and dissatisfactions. But to ensure positive customer interactions, having professionally trained customer service agents is critical to ensure diplomatic and thoughtful management of disgruntled customers.

It has become common practice for businesses to use chatbots for handling standard enquiries and resolving simple issues, which makes sense from an efficiency standpoint. Nevertheless, there should always be an option for customers to communicate with a human agent if the chatbot is unable to resolve the issue. This assures customers that they can always get the support they need.

Customer service is an investment, but a worthy one, as proven by Zappos, which has built its legendary brand on the simple goal of providing the best service in the industry.

Live Up to Your Brand Values

It’s one thing to come up with inspiring and heartwarming brand values and another to operate based on them. Brands of today are expected to walk the talk to earn consumers’ trust and loyalty.

It is therefore essential not to make false claims you can’t deliver or pay lip service to commitments towards issues such as social responsibility and environmentalism. Consumers have become diligent in researching brands and verifying their integrity and authenticity.

Your brand values should define the way your company operates and not be used as a marketing tactic. The truth always comes out one way or another, as we saw in Volkswagen’s disastrous dieselgate scandal.

The company was found guilty of cheating emissions tests in the US to boost sales of their marketed “low-emissions diesel cars”, which racked up over €30bn in legal fees and payouts to customers, including a $15bn settlement in the US.

The financial loss can be recovered over time, but the brand will forever be tarnished.

Keep Your Employees Happy

It would be a huge mistake to take your employees for granted. Considering that your workforce has first-hand knowledge of the way your company operates and your challenges and vulnerabilities, disgruntled employees are as much a threat to your brand’s reputation as unhappy customers.

A case in point is Twitter’s employees leaving en masse and flooding the Twitterverse with damaging insights on the company drama, including comments such as:

• “It feels like all the people who made this place incredible are leaving,” a Twitter staffer said. “It will be extremely hard for Twitter to recover from here, no matter how hardcore the people who remain try to be.”
• “If they go down, there is no one to call when shit breaks,” said a person familiar with how the team operates.

Even if Twitter survives Musk’s radical cultural reset, the brand will always be tainted by Musk’s authoritarian leadership and will no longer be the impartial global communications platform it once was.

Adhere to Ethical Practices

Different countries have different laws and interpretations of ethical business practices. This makes it challenging for multinational businesses with production facilities in developing nations that have less stringent ethical standards, but it doesn’t make the issue any less important.

Nike is only one in a long list of fashion brands that have been found guilty of using sweatshop labour in their global supply chain. Back in the 1990s, Nike was plagued with incriminating reports of employing child labour in Cambodia and Pakistan, where the minors were reportedly working seven days a week for up to 16 hours a day.

The company then spent the following decade overhauling its supply chain practices to win back and retain customers, from implementing independent monitoring and audits to making a public stand against underage employment and imposing stringent health and safety standards on their overseas manufacturers.

While modern slavery laws are now enforced in major developed countries, oversight of manufacturing centres in developing nations remains a challenge due to cultural and legal differences. The onus is therefore on businesses to strike the right balance between profits and human welfare in their supply chain operations.

Safeguard Against Cybercrime

Apart from reputational risk, cyber attacks have become a major threat for businesses as a consequence of the shift towards remote working and our dependance on cloud and mobile technologies.

An Eftsure report highlights that “Cybercrime is on the rise in Australia, with the cost of cybercrime estimated to be $1 billion per year (according to the Australian Institute of Criminology).” The report also cites that “ransomware attacks have increased by nearly 500% since the start of the COVID-19 pandemic”, with 43% of cyber attacks targeting small to medium businesses.

If Australian businesses haven’t woken up to the dangers of cybercrime yet, they should after the recent Optus cyber attack—the worst data breach in the country’s history—where 10 million customers (equivalent to 40% of the Australian population) had their personal data stolen. This was quickly followed by the Medibank ransomware attack less than a month after, with 9.7 million current and former customers’ data compromised.

As cybercrime continues to escalate, it is absolutely essential for businesses to invest in cybersecurity measures to protect both their in-house and remote teams and systems, such as:

• Providing compulsory and current cybersecurity training to all employees
• Investing in cybersecurity solutions for the business
• Regularly updating hardware and software
• Using multi-factor authentication and controlling access
• Monitoring vulnerabilities for data leaks

These are the basic risk management measures every CEO should take to protect their brand in our digital age. Need professional advice and guidance on brand risk management for your business?

At Taurus Marketing, we’re renowned for our ‘No Bull’ ethos, being an award-winning integrated strategic marketing and PR agency based in Sydney. Our proven track record spans young startups to SMEs to ASX-listed corporations.

Talk to us about your risk management needs! We’ll share our insights and recommendations on your best course of action.