Insights into reputation:

Transcription

1 Freedom to Succeed Insights into reputation: Protecting and promoting digital business September 2016

2 It s about working to prevent a crisis, but also recognising that some crises are not preventable. And crucially it s about responding effectively if the worst happens. It s about working to prevent a crisis, but also recognising that some crises are not preventable. And crucially it s about responding effectively if the worst happens. 02

3 Pinsent Masons Insights into reputation: Protecting and promoting digital business Reputation is the top risk Our last GC Dinner generated a lively debate about reputation management among the attending senior legal advisers to the Board of FTSE companies, US corporates and global TMT suppliers. They all had interesting insights to share from their experience of advising their Board and business in preparing, pre-empting and managing a range of issues which go to the heart of protecting and promoting their business and brand. PR specialists Brunswick also provided critical insights from their unique perspective. Reputation is now widely recognised as the top risk on the Board agenda: none of those attending were surprised that a recent Deloitte survey found that 87% of executives now rate reputation risk as more important than other strategic risks. But managing reputation is not just about risk: it s about understanding your relationships with stakeholders including employees, customers, regulators, the media and the public. It s about working to prevent a crisis, but also recognising that some crises are not preventable. And crucially it s about responding effectively if the worst happens. Recent events involving VW, Talk Talk, Carphone Warehouse and Ashley Madison gave us much food for thought. 87% of executives now rate reputation risk as more important than other strategic risks. Deloitte survey 03

4 It s all about digital Digital dominates everyday life. Three clashing forces are working to create a perfect storm for those businesses caught in the cross-hairs of a reputational crisis: social media, an ever increasing public thirst for information, and an ever increasing public concern for privacy. Social media makes social commentators of us all Just as we can comment, like and follow, we can also complain, criticise, agitate and proselytise. Businesses must be seen not just to respect individuals freedom of expression, but to invite frank debate, to welcome feedback and to engage proactively with stakeholders online. Even where content is unlawful, there may be strong drivers for not taking overt legal action. Balancing the countervailing commercial interests will always be key. 200 billion tweets were sent in That s 500 million each day, over 20 million an hour, 5,787 every second. Facebook has 1.4 billion active users. Libel cases prompted by social media posts rose 300% in The public sector has long been subject to freedom of information regimes in this jurisdiction and others. With digitisation of everything, there is an increasing sense of a public entitlement to know the inner secrets and workings of private businesses. People no longer accept being kept in the dark. Businesses are expected to share information with stakeholders, whether employees, regulators or customers. Their leverage is reputation: if you re not open, if you re not a good corporate citizen, if you re not clean, then shareholders will get active, consumers will take their business elsewhere... In stark contrast to the growing expectation of business openness and transparency, the need to protect personal privacy is now gaining traction in this jurisdiction we are catching up with Europe. Attitudes may differ across the generations as to the extent of the the trade-off between convenience of access to services, and privacy. But right now the privacy advocates are in the ascendancy, fuelled by numerous high profile data breaches, and a climate of general suspicion created by laws on government surveillance. Ultimately, it s a nobrainer: organisations are held accountable for the safety of the data they hold about individuals or any company they do business with. Failings can be fatal to the trust in an organisation and its brand. Businesses must be seen not just to respect individuals freedom of expression, but to invite frank debate, to welcome feedback and to engage proactively with stakeholders online. 04

5 Pinsent Masons Insights into reputation: Protecting and promoting digital business How can lawyers contribute? When it comes to minimising the chance of suffering reputation crises, prevention is better than cure. However, having an effective response plan to manage a crisis is as important as taking measures to stop one from happening. How businesses respond when data breaches occur will become increasingly determinative of how their brand is perceived in the aftermath of those incidents. It is well recognised that communications, PR and legal teams should take the lead in reputation management, and that they must be completely aligned. The legal team s role is to get to the truth, establish the facts and advise on the tools available, e.g. the laws of defamation, malicious falsehood, breach of confidence and misuse of private information. They must sit alongside and work closely with the regulatory team and internal communications or PR who cover internal communications, investor relations and regulatory aspects. Some key themes for good practice: Understand your stakeholders: building trust with customers, suppliers, regulators, the media and anyone that may impact on your business s reputation will positively influence their response to a reputation issue. Be ready: coordinating teams including legal, PR, HR and IT is central to effective reputation management. Forgotten policies in a drawer are no good. With speed and readiness of response central to successfully managing a reputation crisis, simulation goes a long way to ensuring cross-disciplinary teams communicate effectively before, during and after a crisis hits. Speed of response: all too often there are stories of companies doing too little too late in the wake of reputation-damaging events or behaving in a way that causes damage in the long run. Response times should usually be in minutes, not hours or days. Teams on the ground need to be able to take control, lead with flexibility, make decisions with less-thanperfect information, communicate well internally and externally, and inspire confidence. This often requires innovative thinking. Approach each incident on its merits: there is no blue print for a reputation incident and sometimes the best response is to do nothing. If a reputation crisis occurs that was an honest mistake, the consensus is that in most cases it is best to admit fault. If managed well, businesses can emerge stronger. When a crisis seems like it s over, it isn t: the work goes on long after you breathe a sigh of relief. The way you capture and manage data, log decisions, manage finances, handle insurance claims, and meet legal requirements on the road back to normality can determine how strongly you recover. It is well recognised that communications, PR and legal teams should take the lead in reputation management, and that they must be completely aligned. 05

6 Contacts David Barker Partner T: +44 (0) M: +44 (0) E: Marc Dautlich Partner, Global Head of Information Law T: +44 (0) M: +44 (0) E: Diane Mullenex Partner, Head of Telecoms T: +44 (0) M: +44 (0) E: Marc L. Holtorf Partner Munich T: +49 (0) M: +49 (0) E: Paul Haswell Partner Hong Kong T: E: David Isaac Partner, Head of AMT T: +44 (0) M: +44 (0) E: Clive Seddon Partner T: +44 (0) M: +44 (0) E: 06

7 Pinsent Masons Insights into reputation: Protecting and promoting digital business Ultimately, it s a nobrainer: organisations are held accountable for the safety of the data they hold about individuals or any company they do business with. 07

8 This note does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. Pinsent Masons LLP is a limited liability partnership registered in England & Wales (registered number: OC333653) authorised and regulated by the Solicitors Regulation Authority and the appropriate regulatory body in the other jurisdictions in which it operates. The word partner, used in relation to the LLP, refers to a member of the LLP or an employee or consultant of the LLP or any affiliated firm of equivalent standing. A list of the members of the LLP, and of those non-members who are designated as partners, is displayed at the LLP s registered office: 30 Crown Place, London EC2A 4ES, United Kingdom. We use Pinsent Masons to refer to Pinsent Masons LLP, its subsidiaries and any affiliates which it or its partners operate as separate businesses for regulatory or other reasons. Reference to Pinsent Masons is to Pinsent Masons LLP and/or one or more of those subsidiaries or affiliates as the context requires. Pinsent Masons LLP For a full list of our locations around the globe please visit our websites: and