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  • Writer's pictureLaura Dickson

How can your company avoid the Will Smith effect? (Reputational Risk)

We all know that Will Smith has decided to resign from the Academy of Motion Pictures Arts & Sciences in an attempt to mend his reputation after slapping Chris Rock. If the public stops attending his movies, the fallout could affect his career and those involved in his films. He makes over $30 million per movie. In short, a slap has resulted in reputational risk.

Companies need to pay attention to reputational risk as well. A CEO may do something inappropriate at a social event, or there could be illegal activities that reflect on the entire company. Reputational risk can have a devasting effect due to the speed of the Internet. Even in 2007 when a study was done on Reputational Risk by Eccles, Newquist & Schatz and published in the Harvard Business Review, the influence of a certain threshold of visibility in the press was important. The studies looked at positive and negative media about BP and drug companies. They found that a lack of media presence, in general, could be most damaging when there is a negative incident.

It is most important to take an honest look at the gap between the perceived reputation and reality. Is the company over-promising? What are the internal controls really like? Are Managers overstating the reputation because that is what they want to believe?

Over time, societies value’s change, what was once acceptable, becomes frowned upon. The article points to GE as one of the first companies that were conscious of the environment. Now many companies do not want to be seen as contributing to a landfill or using unnecessary packaging.

A recommendation is to have a person one level below the CEO, responsible for reputation. Often reputation can be assisted through the communications department as well. Often crisis communication plans should be in effect so that when an incident takes place, the website changes to address the issue with appropriate messaging from the CEO or communication department.

Today, many are skeptical of traditional media and tend to follow Tik Tok, Twitter, etc. In the age of disinformation, the threat of rumour and fact checking becomes even more perilous. Will Smith’s publicists may be hoping that Hollywood will forget about the slap but that remains to be seen. As a company, always keep reputational risk in mind.


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