Companies Put Reputation Before Profit, Says Global Survey
Chief finance offers and other finance leaders around the world are putting corporate reputation first with 76% of Chartered Global Management Accountants surveyed by the AICPA and CIMA saying their organisations are prepared to lose profit in the short term to protect their image over the long term.
The finding comes as organisations around the world, from electronics manufacturers to clothing retailers, face more scrutiny for their supply chains, factory processes, sales strategies and other practices.
Seventy-six percent of CGMA designation holders globally said they now see more focus on reputational risk in their industries and cited three main reasons for the trend: market demand for more transparency; reputational failure at a leading organisation or competitor; and the rise in social media.
Globally, 65% of CGMA designation holders surveyed said their organisations often or always consider the financial implications of reputational risk when making decisions. And almost half (44 per cent), said their organisations have rejected projects that made financial sense because the reputational risks were too great.
"Reputation might not be on the balance sheet, but it is one of the most important assets that companies have," says James R Blake, CPA, CGMA, CFO of Morey's Piers in New Jersey.
Blake notes that in an age where reputation can be wrecked at the speed of a Tweet, finance teams increasingly have to understand that reputation lost in an instant can have a long tail in affecting the company’s future.
Tanya Barman, Head of Ethics at CIMA said: "Organisations are increasingly recognising the need to take reputational risks very seriously if potential crises are not to turn into catastrophes."
Nearly a quarter of businesses surveyed admitted to experiencing reputational failure in the past and the widespread use of the Internet and social media casts a harsher spotlight than before.
"However, what is very worrying is the revelation that businesses still appear to be struggling with how they go about managing non-financial reporting in this area," notes Barman.
Barman adds that, in order to be fully protected, it is vital for finance directors and leaders to start moving away from focusing primarily on the short term and to begin collecting, reporting and monitoring reputational risk information.
"This will not only enable them to performance manage an important aspect of their business, but will also be crucial for long term sustainability and helping to maximise opportunities and to minimise risk."
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