Reputation: the overall sense of integrity and trust, so what is internal audit's role?

"It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently."

- Warren Buffett

Reputation is the overall sense of integrity and trust that an organisation exudes. It is a perceived by others. It is intangible. Yet organisations are wholly accountable for it. Effective management of reputation has never been more important than in an era that combines profound corporate uncertainty with intense media capability.

With boards being both culpable and liable for an organisations reputation it is an important topic for CAEs to invite discussion on. This paper explores key aspects of organisational reputation, its fragility, estimating its value and the multifarious role chief audit executives (CAEs) have in providing assurance over its management.

Fragility of reputation

An organisation’s reputation is a realisation of all the intentional and unintentional communications and activities that are undertaken. Different stakeholders are likely to have diverse views of an organisation because of their particular priorities and interactions – investors, customers, patients, employees, media, regulators. It is the emotional connection between an organisation and its stakeholders.

It is irrelevant what an organisation thinks of itself, its reputation is what others think of it. Unlike other intangible assets such as brands or intellectual property which can be managed, reputations can only be influenced and are built over time.

Airmic and the Reputation Institute produced a guide to managing reputation risk, designed for risk managers and auditors; it sets out seven dimensions that organisations need to deliver against to drive reputation. Against each one it sets out assessment criteria and outlines potential risk events. 

The diversity of stakeholders, volatility of emotion and multiplicity of dimensions demonstrate how easily reputations can be tarnished or damaged. Reputational risk events are not new however the digital dimension…

"You can’t build a reputation on what you’re going to do"

- Henry Ford