Thursday, 9 March 2017

Reviews


We are seeing a growing number of reviews of our book including the following.

  •  Lord Owen CH FRCP, Former UK Foreign Secretary and author of The Hubris Syndrome, on the book's front cover and in 'The House', Parliament's in-house magazine:
An exceptional book for learning at every level – whether you are a business school student or a chief executive; Prime Minister or a new recruit into the civil service.”
  • Richard Bacon, a member of the Parliamentary Public Accounts Committee since 2001 and author of 'Conundrum' wrote, in Civil Service World (May 2017):
"This superb book is a work which leaders and managers in any organisation will find invaluable." 
  • Stefan Stern in the Financial Times, here
"Businesses and executives are ... vulnerable on a number of levels. They would do well to reflect on the serious messages contained in this well-argued book."
  • Richard Jukes, Chairman of brand and communications specialists Grayling, writing in Spear's Magazine: here
"This book manages to balance highly credible business advice with just enough science to give their findings depth and substance. It should become essential reading for everyone sitting on a board"
"The topical nature of the subject matter and the quality of the examples and references combine to make this a challenging and valuable addition to a director’s reading list.  The “Questions to Mull” section at the end of each chapter will help managers to apply the lessons of the book to their own experience.  Masters’ business students will also find it relevant and interesting."
Rating: 5 star, a must read."
"The authors have produced a crisply written tome which is easy and engaging to read. Its format of insights, followed by case studies and then solutions works well. This should be no surprise. The authors Anthony Fitzsimmons and Derek Atkins are well versed in this area - their previous publication Roads to Ruin on behalf of Cass Business School for the insurance and risk industry is rightly highly regarded. They bring their experience to bear in this book."
  • 'People Management' the magazine of the Chartered Institute of Personnel Development wrote:
"The idea that people are key to mitigating and combatting risk will come as little surprise but, in Rethinking Reputational Risk, the authors take us beyond vague notions of culture and compliance to examine the biases, fallibilities and skewed priorities that led to disasters as varied as MidStaffs and Deepwater Horizon as well as how to genuinely avoid them in the future."
"Their attribution of [reputational] vulnerability to unrecognised, often systemic causes, is what makes the book worth reading"
"After walking the reader through the risks that can lead to failure, the authors offer a series of insightful case studies. There is a wealth of information here, especially in the take-home points they offer at the end of each chapter.  [T]he book ... uses reputation to explore how and why people fail and why systems, such as the three lines of defence for example, are flawed."
"This insightful guide could help you answer some of the hard questions relating to one of today’s most critical aspects of risk management."
"Riveting.  As co-chair of the Presidential Commission on the BP Oil Spill, I learned how the billowing fire and flying shrapnel of the disintegrating Gulf of Mexico oil platform punctured the reputations of all off-shore oil enterprises. Hundreds of reputations and billions of pounds might have been saved through a close reading of this book.”
 “This thoroughly enjoyable book is a must-read for leaders of all organizations at all levels, right up to the board and its leadership.”
  •  A view from the Charity sector's Richard Evans 'One Riot' blog here
    "It’s ... [hard] for an organisation to ask itself what it is about its own culture that might lead to reputational damage. But as hard a question as this is, it’s the most important one. And though it might make us uncomfortable, unlike some external risk factors it has the benefit of being something that it is relatively straightforward to do something about."


There are also reviews on Amazon UK and Amazon.com

We shall add links to reviews as we find them.

Monday, 2 January 2017

Rethinking Reputational Risk


For too long, there has been an unspoken assumption in traditional risk management and regulation that organisations are quasi-mechanical and that decision making is essentially rational.  The implication is that you if can devise the right rules, risks will disappear because people will respond to them logically.

In truth, all organisations consist of real people who exhibit the range of normal human feelings, emotions and behaviours and have individual characters.  These, and well-understood mental short-cuts and biases, are as important as strict logic in making decisions in the real world.  Real people constantly react to real life in ways that, whilst predictable, are not strictly rational.  It is those who lack these feelings and emotions who are unusual, not those who exhibit them.  

You visit the baker to be faced with an aromatic array of fresh bread.  Do you rigorously compare the nutritional content of each loaf, run quality tests and carry out a price and product comparison with other bakers in the vicinity (not forgetting transport and opportunity costs) that, if you are strictly rational, you ought to consider?
Of course you don’t.   You follow your eyes, nose and feelings rapidly to choose what you feel is the best choice: today a bag of bagels; tomorrow scented spelt scones; and if you like sweet things you may scoff the scrummy sugared doughnut you know you should shun.  If you stuck to strict logic, the baker’s shelves would be empty by the time you made your decision.

Feelings and emotions are an important element in normal decision-making, and this is true of all normal people in all contexts – including the most intelligent and respected business leaders in their work.  Unfortunately the emphasis on ‘homo economicus’, economists’ rational, benefit-maximising model of man  leads many leaders to assume this crude model represents reality, a double danger if they do not realise the extent to which their own decision-making depends on feelings and emotions. 

Real people use what behavioural economists and psychologists call heuristics and biases in making decisions.

Heuristics are mental short cuts that we all use to simplify decision-making.  There are dozens of them, working beneath our consciousness.  For example there is evidence that where we recognize one of a number of choices but have no better information, we are likely to put a lower store on the option we do not recognize.  That is the recognition heuristic. 
Then there are biases. An important bias is the ‘optimistic bias’.  As healthy humans we tend to delude ourselves that bad events are less likely to happen than good ones.  And we tend to attribute positive events to our skill and adverse ones to ‘them’ or bad luck: the ‘self-serving bias’. 
Many more heuristics and biases provide the numerous unrecognised assumptions and short-cuts that make the life of a normal person – well normal.

This matters.  People and the way they behave is what can make organisations great.  But one of the insights to emerge from our work on “Roads to Ruin” the 2011 Cass Business School report for Airmic (we were two of the report’s four authors), is that people are almost always at the root of why organisations are derailed.  They are implicated twice over: first because individual and collective human behaviour, most of it perfectly normal and predictable, lies at the root cause of most crises; and then because it regularly tips potentially manageable crises in to unmanageable reputational calamities.   

We have since established that seniority amplifies the consequences of behaviour for good or ill, so that other things being equal, behavioural and organisational risks related to leaders typically have far more serious consequences than an analogous errors lower down the hierarchy.

Unfortunately this area of risk is not systematically recognised by classical risk management.  Some areas of people risk are captured by looking at process safety, but this leaves huge gaps.  And a restricted view of reputational risk has left large areas of risks to reputation doubly unprotected.  Leaders and risk professionals have a structural blind spot that leaves the organisation – and its leaders – predictably vulnerable.

We have solved the problem by rethinking reputation and reputational risk – and so can you.  The Financial Times lexicon defines reputation as: “Observers’ collective judgments of a corporation based on assessments of financial, social and environmental impacts attributed to the corporation over time”; and there is much bickering over the nature of reputational risk.   

Whilst the FT definition is good in parts, it is too narrow.  We prefer the deceptively simple: 

“Your reputation is the sum total of how your stakeholders perceive you.”

Think about it and you will find its hidden depths.  One is that you lose your reputation when stakeholders come to believe, rightly or wrongly, that you are not as good as, or are worse than, they previously believed you to be.  That leads to our definition of reputational risk: 

“Reputational risk is the risk of failure to fulfil the expectations

of your stakeholders in terms of performance and behaviour”

Many ‘performance’ failures are caught by enterprise risk management; but few risks from behaviour or organisation are captured.  The result is that risks that both cause crises and destroy reputations are not captured, so they remain unmanaged. Worse, the research shows that behavioural and organisational risks can take many years to emerge.  In the meantime, leaders think all is well when, helped by the self-serving bias, they have been fooled into complacency by what is, in truth, a run of good luck; and they have lost the opportunity to deal with potentially lethal unrecognised risks before they cause harm.
 
And as Richard Feynman, the late lamented Nobel laureate who uncovered the people risks that caused NASA’s Challenger disaster, said: “The first principle is that you must not fool yourself; and you are the easiest person to fool.”

Professor Derek Atkins
Anthony Fitzsimmons


Rethinking Reputational Risk: How to Manage the Risks that can Ruin Your Business, Your Reputation and You” will be published on 3 January.  You can read reviews of the book at www.koganpage.com/reputational-risk   For a limited time you can order the book there at a 20% discount: use code  ABLRRR20

This blog is based on an article first published in Management Today.