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Reflections on
Operational Risk Management
, Risk Books, Part 5.
Resilience and Reputation
227
security specialists will attend to IT disruptions, including hacking, while business
continuity specialists concentrate on supply chain issues and business disruption.
■
A communication team (external and internal), which deals with the media and the
different stakeholder groups, including employees. In many large firms, commu-
nication teams have specialist media training and crisis communication strategies.
As the case studies in this chapter show, plans vary from company to company.
In an emergency, following a script will help to control emotions that cloud judg-
ment and can lead to bad decisions. Composure is essential: a response team must be
calm and collected. One of my peers summarized it best: “Have a cold book for hot
times.”
Continuity testing is commonplace and even mandatory, but it is often limited
to the technical aspects of operational recovery, without including sufficient stake-
holder management and communication – which of course are key drivers of a firm’s
reputation. War room simulations, facilitated by business continuity consultants or
specialists in organizational resilience, provide useful mitigation practice. The case
study presents an exercise that I ran at the World Bank, during the pilot program
of the PRMIA
9
Certificate of Learning and Practice in Advanced Operational Risk
Management.
C A S E S T U D Y : W A R R O O M T R A I N I N G S E S S I O N
A T T H E W O R L D B A N K
In June 2018, a group of 33 risk champions at the World Bank were the first to
pass the PRMIA Certificate of Learning and Practice in Advanced Operational
Risk Management. During the program, one session involved a war room simula-
tion that participants discussed in small groups. Ironically, our training room that
day was in one of the World Bank’s crisis rooms. The five topics proposed were:
■
Topic 1: Cyberattack on financial transfers.
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Topic 2: IT disruption caused by a third party.
■
Topic 3: Epidemic affecting the World Bank’s personnel.
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Topic 4: Terror attack in Washington, D.C.
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Topic 5: Scandal involving a member of staff.
(
Continued
)
9
Professional Risk Management International Association. www.prmia.org
228
RISING OPERATIONAL RISKS
Teams were asked to address the following questions:
■
What priority actions do you recommend in the following crises?
■
Who are your first and second respondents?
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What are the knock-on effects to address?
■
Once the crisis is passed, how do you restore confidence in your ability
to operate?
R e p u t a t i o n a n d R e s i l i e n c e
This chapter discussed the relationship between resilience and reputation management,
underlining that positive stakeholder engagement and dialogue builds a favorable rep-
utation that improves resilience. Recent Australian empirical research reinforces the
point. A study analyzed the content from 10,582 Australian firms’ annual reports, span-
ning 17 years, to identify what senior executives communicate to their stakeholders.
10
The results reveal the interactions between resilience, reputation and financial perfor-
mance. The authors state:
“We highlight that reputation acts as a source of resilience which provides firms
with an enhanced ability to adapt when faced with external difficulties as well as allow-
ing the firm to rebound following a performance decline.”
Table 20.2. presents the essential steps for reputation risk management, combining
stakeholder management, crisis management and communication, to achieve a favor-
able reputation and enhanced resilience.
C o m i n g O u t o n T o p
There is an upside to crises when they are managed well: they are opportunities to learn
and opportunities to shine. People reveal themselves in adversity – they show their true
colors. Like people, firms are judged by the way they handle adversity.
During a training session in 2018, a business manager at UBS told the room:
“Adoboli
11
is the best thing that happened to us.” He meant that in reacting to the
heavy losses sustained by a rogue trader, UBS rediscovered its true self. The ancient
Swiss bank refocused on traditional private banking activities, with rigorous controls,
and distanced itself from the reckless investment banking activities of recent years.
10
Tracey, N. and French, E. (2017) “Influence your firm’s resilience through its reputation: results
won’t happen overnight but they will happen!”,
Corporate Reputation Review
, February, 20,
1, 57–75.
11
Kweku Adoboli generated $2.3 billon in trading losses for UBS in London in 2011.
Resilience and Reputation
229
T A B L E 2 0 . 2
Essential steps in reputation risk management
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