Contact: Costa Zakis
Telephone: (02) 8864 7215
Every organisation with an identity has a brand that it must manage and protect to survive and prosper. A brand can be embodied in a globally advertised symbol or expressed by the renown of partners in a company that bears their names. However it is projected, the importance of the brand to sustainability of an enterprise has never been greater.
The irreparable damage done to a brand owner's business following crisis or catastrophe may substantially outweigh the immediate and visible costs. A risk management framework without proper insight into the role of brand is incomplete.
We have adopted a working model of brand risk that distinguishes between its three interacting elements: brand equity risk, reputation risk and structural risk. Brand equity risk
Brand equity risk describes exposures that can undermine a brand's ability to maintain its desired differentiation and competitive advantage. These attributes are the components of a brand's image that actually drive its performance. They will, for example, demonstrably affect the willingness of a customer to pay a price premium, to transact more frequently - or to transact at all. Typically, threatened brand equity elements tend to weaken over time until a moment of crisis. This makes incipient failure harder to detect and harder to reverse. Reputation risk
Reputation risk groups together those exposures that arise from failure to meet basic expectations of performance that apply to any comparable organisation operating in the same field. Familiar examples would be culpable accidents affecting the safety of individuals, lapses in technical quality or unethical conduct. By this definition, risk to reputation typically applies to factors that are 'brand essentials'. Merely complying with norms of performance in these essentials will not create competitive advantage. They are the minimum stakes required to stay in the game. By contrast, bad performance or catastrophe in any one of these areas can quickly destroy the vital bond of trust that exists between the brand and its customers or other stakeholders.
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This describes exposures that might affect an entire industry or market segment. Altered attitudes to consumption of a particular product, new regulatory imposition in response to failure of another organisation, the fall from favour of a particular industry among potential new employees: all such occurrences may directly or indirectly weaken the economic performance of your brand. While the objective of brand risk management is clearly to protect brand value, the financial consequences of brand failure may be felt elsewhere in the profit statement or balance sheet. When brand failure loses you a sale, you may lose the whole transaction, not just a brand price premium. The process of financial valuation alone may not provide sufficient information about the complex nature of a brand to enable proper assessment of threats to its future performance. Gauging the impact of brand-related risks calls for an estimation of how any act, fact or omission is likely to affect stakeholder attitudes and behaviour after an organisation's immediate response or technical recovery. It is normally advisable to identify a range of possible outcomes. Tools and techniques exist to build insight and guide the allocation of risk management resources in the face of uncertainty. In the absence of a known project that requires particular brand risk evaluation (such as a major new business initiative), we suggest that organisations should build brand impact assessment into their overall risk identification process. This is because many cases of brand damage result from other operational failures. Understanding your brand and the nature of brand risk is the first step towards protecting your brand from possible failure - and towards improving its value performance in the process.
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