The governing body and strategy

Question 1

CORPORATE GOVERNANCE AND STRATEGY - THE NATURE OF CORPORATE GOVERNANCE

When is governance required?

What will need to be established? What will this set?

In the governance of assets, who are the 3 key players?

Answer 1

Any structure that requires the use and control of the assets of a 3rd party will require governance

Some sort of operating code, which will set the structure for the utilisation of the assets, the parameters of operation, the perceived objectives, and the anticipated results

1. OWNER of assets needs governance assurance of correct usage – how do the owners ‘hold the directors to account’?
2. MANAGER of assets needs governance parameters of expectation – what do the owners expect for allowing the use of their assets?
3. USER of the assets needs governance-related objectives – how do employees know about the vision and the mission?

Question 2

CORPORATE GOVERNANCE AND STRATEGY - THE NATURE OF CORPORATE GOVERNANCE

In a commercial organisation, the strategic expectation would normally be to do what?

What does this mean for organisations?

The ‘regulation’ and ‘oversight’ of all matters pertaining to governance within the UK sits with who?

What does Principle B of the 2018 UK CG Code say?

Answer 2

to maximise the long-term return to the owners and to enhance the value of the assets = s.172 CA2006 = act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole

Strategic objective must be the promotion of success BUT ‘success’ may be interpreted differently by different organisations = need for clarity of what it is that an organisation is trying to achieve, before attempting to define the optimal approach to governance

FRC = publish UK CG Code and guidance

Principle B = the board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture

Question 3

CORPORATE GOVERNANCE AND STRATEGY - THE GOVERNANCE MATRIX

There is always an interaction between the governance of an organisation and its operation. How could this be displayed?

What is the differentiation between governance and operational management?

Answer 3

As a Venn diagram = ‘operational management’ and ‘governance’ overlap with executive directors in the intersection, NEDs within governance and managers within operational management (Cosec always sits in intersection)

Governance = involves responsibility and accountability for the satisfaction of stakeholder expectations

Operational management = involves responsibility and accountability for the delivery of process

Question 4

CORPORATE GOVERNANCE AND STRATEGY - THE GOVERNANCE MATRIX

In the development of strategy, what is the biggest differentiator between the roles of those in operational management and governance?

What will operational management have responsibility and accountability for? (4)

What will those empowered with governance have responsibility and accountability for? (3)

Answer 4

Timeframe involved

Operational management have responsibility and accountability (to those empowered with governance) for (1) the short- to medium-term timeframe of strategy, (2) the action required to fulfil the strategic objectives, (3) the delivery of the perceived strategic outcomes, and (4) a review of the effectiveness and sustainability of the required strategic approach

Those empowered with governance will have responsibility and accountability (to the ultimate owners) for (1) the medium- to long-term timeframe, (2) the establishment of strategic objectives, and (3) control to ensure that the ultimate strategic objectives are satisfied

Question 5

CORPORATE GOVERNANCE AND STRATEGY - THE GOVERNANCE MATRIX

What is the principal and agent problem?

What is the dilemma?

Name an example that epitomises the problem with shareholder control and power.

Answer 5

The matrix of governance and operational control and oversight can lead to confusion and conflict of who is accountable to whom:
Principal = establishes the objectives and the strategic direction and parameters.
Agent = works to deliver the objectives within the established strategic parameters

Dilemma = to establish whether directors and managers, as agents, are working simply on behalf of the principal, or also on behalf of their own interests as well

Aston Martin restructure ahead of flotation on the LSE

Question 6

CORPORATE GOVERNANCE AND STRATEGY - STRATEGY, AT THE HEART OF GOVERNANCE

A core focus of effective governance is the alignment of strategy with what? (2)

What does this require those empowered with governance to do?

What does this align to? (Need to understand the realities of what?)

Answer 6

risk and control as stated in Principle O of 2018 UK CG Code = strategy, risk, and control are in a triangulation

Those empowered with governance need to understand the strategic objectives of the organisation, the risks associated with the achievement of those objectives and how to then control and mitigate the identified risks.

The need to understand the realities of ‘today’ as the starting point for the development of our vision of the ‘future’
= all strategy is a leap into the unknown and therefore will involve at least a degree of risk

Question 7

CORPORATE GOVERNANCE AND STRATEGY - TYPES OF GOVERNANCE STRUCTURE

What are the 2 models/approaches to governance?

What factor will influence which one is used?

Which one does the UK use?

Under this, what 6 things must UK boards have regard to? (S.172)

Answer 7

A stakeholder approach (stakeholder model) and a shareholder approach (ownership model)

type and size of organisation:
(1) shareholder model usually controlled by a unitary board of directors acting on behalf of shareholders (UK and USA)
(2) stakeholder model often associated with 2-tier board system (supervisory board and management board) (Germany and Japan)

s.172 CA2006 has shifted UK corporate economy from a shareholder to a stakeholder approach

Board must have regard to:
1. The likely long term consequences
2. Employees’ interests
3. The need to foster business relationships with suppliers, customers and others
4. The impact of operations on the environmental and community
5. The desirability of maintaining a reputation for high standards of business conduct
6. The need to act fairly as between members

Question 8

CORPORATE GOVERNANCE AND STRATEGY - TYPES OF GOVERNANCE STRUCTURE

What are the 6 differences between the shareholder model of governance and the stakeholder model of governance?

Answer 8

1. Wealth
   Shareholder = primary interest of shareholders is financial, and wealth is created for them through the organisation (have a priority claim on the wealth of the organisation).
   Stakeholder = wealth is created by and for a variety of different stakeholders, each of whom has a claim to an equitable proportion of the wealth of the organisation.
2. Investors (and returns)
   Shareholder = investors are more likely to receive a higher rate of return through dividend and/or increase in share value.
   Stakeholder = the return to investors is likely to be diluted by the wider interests of differing stakeholders.
3. Timeframe
   Shareholder = Shorter-term perspective = ‘cash-in-hand’
   Stakeholder = longer-term perspective
4. Decision-making
   Shareholder = focused DM
   Stakeholder = slower DM with wider stakeholder involvement.
5. Objectives
   Shareholder = focused objectives.
   Stakeholder = breadth of differing strategic objectives.
6. Return
   Shareholder = focus on market return expectations
   Stakeholder = development of own levels of acceptable stakeholder returns.

Question 9

CORPORATE GOVERNANCE AND STRATEGY - TYPES OF GOVERNANCE STRUCTURE

What are the benefits of the shareholder model for investors (2), the economy (2), and managers(1)?

What are the disadvantages for investors (1) and the economy (2)?

Answer 9

BENEFITS
For investors = (1) higher rate of return, (2) reduced risk

For the economy = (3) encouragement of entrepreneurship, and (4) encouragement of inward investment

For management = (5) independence

DISADVANTAGES
For investors = (1) difficult to monitor management

For the economy = (2) risk of short-termism, and (3) risk of senior management greed

Question 10

CORPORATE GOVERNANCE AND STRATEGY - TYPES OF GOVERNANCE STRUCTURE

What are the benefits of the stakeholder model for investors (2) and stakeholders (1)?

What are the disadvantages for management (3) and the economy
(1)?

Answer 10

BENEFITS
For investors = (1) closer monitoring of management, and (2) longer-term decision horizons

For stakeholders = (3) deterrent to high-risk decision

DISADVANTAGES
For management = (1) potential interference, (2) slower decision-making, and (3) reduced independence

For the economy = (4) reduced financing opportunities for growth

Question 11

CORPORATE GOVERNANCE AND STRATEGY - TYPES OF GOVERNANCE STRUCTURE

What are the 3 core governance structures?

For each, compare the purpose, principle, practice, and participation.

Answer 11

1. MONISTIC
   Purpose = shareholder value
   Principle = unitary board and director controlled
   Practice = capital market structure
   Participation = recognition through law
2. DUALISTIC
   Purpose = stakeholder value
   Principle = dual board control
   Practice = bank and large institution domination
   Participation = underpinning social ethos
3. PLURALISTIC
   Purpose = stakeholder value
   Principle = hierarchies of control
   Practice = bank and large institution domination
   Participation = driven through keiretsu structure

Question 12

STAKEHOLDER EXPECTATIONS - TYPES OF STAKEHOLDERS

What is a stakeholder?

What do each of the following stakeholders provide for a company, and what do they expect to receive in return:
1. Members
2. Employees
3. Suppliers
4. Customers
5. Community and environment

What are the primary (1) and secondary (2) expectations of these differing groups as identified by Lynch (2015)?

Answer 12

stakeholder = anyone who has an interest or concern in the business, is rightly expecting some form of return, response or action from the business, and if this is not received has the ability to disrupt the business in some manner

Members = invest funds in shares to obtain voting rights, dividends, and increase in share value. (1) financial return, (2) added value

Employees = input their time, experience, knowledge, and labour in return for appropriate remuneration, safe working conditions, and workplace benefits. (1) pay, (2) work satisfaction/training

Suppliers = provide supplies to the business in return for payment and potential for continuity of supply. (1) payment, (2) LT relationships

Customers = purchase products/services in return for satisfaction of their perceived expectations. (1) supply of goods and services, (2) quality

Community and environment = in return for the right to operate, the business will need to comply with national and local laws and CSR expectations (local/national authority could refuse to licence business operations) (1) safety and security, (2) contribution to community

Question 13

STAKEHOLDER EXPECTATIONS - STAKEHOLDER MAPPING

How can stakeholders be classified? (3)

Why is it important for those empowered with governance to take into consideration the needs and expectations of the differing stakeholder groups?

Answer 13

1. Internal = owners and employees – those who have a close and dependent relationship with the business and a vested interest in its success
2. Market = suppliers and customers – those who have a direct trading relationship with the business
3. External = all other stakeholders of the business with either direct (e.g. banks) or indirect (e.g. government, environmental) relationships with and expectations from the business.

Required under s.172 CA2006 and companies defined as ‘large’ under the Act are required to explain in their annual directors’ report how they have fulfilled their requirements under this section, and how they have actively considered the differing demands of their stakeholders

Question 14

STAKEHOLDER EXPECTATIONS - STAKEHOLDER MAPPING

The levels of power, influence and strategic impact of different stakeholder groups can be mapped to help to identify what?

Johnson (2017) suggested that the 2 core dynamics for mapping are what?

Explain his table.

Answer 14

identify when and where a business needs to consider the potential impact of not satisfying the stakeholder expectations

(1) the ability to disrupt, and (2) the levels of interest that the stakeholder would take in its ‘stake’

Stakeholder mapping = where low power to disrupt the business and:
(1) low interest in the business = minimal effort require by the organisation
(2) high interest in the business = stakeholders must be kept informed

Stakeholder mapping = where high power to disrupt the business and:
(1) low interest in the business = stakeholders must be kept satisfied
(2) high interest in the business = these are the key players

Question 15

STAKEHOLDER EXPECTATIONS - THE POLITICS OF STAKEHOLDER POWER

What is the politics of power?

What is meant by power?

Can power change?

When undertaking a stakeholder mapping exercise, it is useful to look at and understand what?

Answer 15

Politics of power = the strategic journey of an organisation can be significantly influenced by the forces of stakeholders and others

Power = exercise of power reflects the ability of one or more individuals to persuade other people to follow different courses of action

Yes = in any organisation, as time evolves, the power balance is likely to shift = in fast-moving organisation with many demanding stakeholders, this could mean frequent changes of strategic focus = can lead to disruption and chaos

the origin and indicators of the differing powers that might be at play = the types of power

Question 16

STAKEHOLDER EXPECTATIONS - THE POLITICS OF STAKEHOLDER POWER

When undertaking a stakeholder mapping exercise, it is useful to look at and understand the types of power.

Name 5 examples.

These aspects of power also need to be considered within the context of what?

Expand on this and compare the traditional end of the dynamic with the empowered end.

Answer 16

1. Origin of power = Position. Indicator of power = autocracy, right and ability to influence behaviour (e.g. seniority)
2. Origin of power = Expertise. Indicator of power = professional or other abilities (e.g., finance)
3. Origin of power = Vision. Indicator of power = end-game understanding (e.g., the bigger picture)
4. Origin of power = Information. Indicator of power = wider detail and understanding (e.g., why)
5. Origin of power = Judgement. Indicator of power = power to decide

within the context of the type of organisation, and the stakeholder impact upon strategy = power dynamic of either traditional (centralised, bureaucratic, structured) or empowered (developed, participative, fluid)

At the traditional end of the dynamic it is much harder for a stakeholder to influence the strategic direction of an organisation, which is probably focused around a rational strategic approach.

In a more empowered organisation, there is more likely to be an emergent and collective approach to strategic development and therefore a greater ability for stakeholder influence.

Question 17

STAKEHOLDER EXPECTATIONS - STAKEHOLDERS IN NON-COMMERCIAL ORGANISATIONS

Many non-commercial organisations, for instance some public sector bodies, charities, co-operatives, and other social-based enterprises will often involve their stakeholders to a much greater extent than a commercial organisation.

What is the benefit?

What is the disadvantage? Why?

Many of the stakeholder groups are similar to commercial organisations, but what are the 2 differences?

Why might there be multiple conflicts for strategy and governance?

How can these be managed?

Answer 17

benefit = can be a great source of strength

disadvantage = can also provide a significant restriction on strategic growth and direction = organisation with multiple stakeholders can find itself with too many people involved in the strategic leadership

(1) the direct influence and understanding of what it means to be a member might be significantly different, and
(2) there are likely to be inherent conflicts of interest between the views of the individual member, the views of a group of members, and the views of the administrative function tasked with running the organisation

Because often an individual may be a member, a customer, a supplier and an intrinsic stakeholder within the forces of the surrounding environment = conflicts of strategy and governance

managed using a robust system of conflict management and often a conflicts register and accurate records of conflicted decisions made at board meetings

Question 18

STAKEHOLDER EXPECTATIONS - THE NEED FOR STAKEHOLDER ANALYSIS

What are the 4 core forces that are continually impacting the organisation and its stakeholders?

What can resistance to each of these result in?

Answer 18

1. The law = starting point and limitations of those empowered with governance
   Resistance = civil or criminal court action against individuals and/or the organisation.
2. Best practice = codes, guidelines, customer expectations, ‘what others do’
   Resistance = reputational damage and damage the relationship with regulator
3. Societal expectation = the ever-changing expectations of wider society may lead an organisation and its stakeholders to adapt both its governance and its strategy to be seen to be ‘ticking the appropriate boxes’.
   Resistance = media criticism of the organisation with resultant reputational damage
4. Visibility = the perpetual dichotomy that exists between what we are willing and able to reveal about our organisation, its governance and its strategic direction.
   Getting this wrong = substantive demands on time from those empowered with governance

Question 19

RISK, REPUTATION, AND STRATEGY - RISK MANAGEMENT

What is risk?

What is the difference between risk and uncertainty?

What is an understanding of the risk associated with any action derived from? (2)

What is wisdom?

How can wisdom be achieved?

Answer 19

Risk = any circumstance with more than one possible outcome

‘risk’ refers to a range of understandable and quantifiable outcomes, whereas ‘uncertainty’ suggests that although we can perceive a variety of outcomes, they are not quantifiable.

derived from the accumulation of knowledge and experience to that very moment in time when we are assessing such risk

How we react is often referred to as wisdom = our ability to take everything that we have retained from the point of our birth to a particular moment of time, and our ability to use this knowledge to inform a specific judgement or action

To achieve this concept of wisdom it is necessary to mentally, and/or physically, step back from any situation and allow the brain to assimilate what we are faced with and how our experience to date can inform our action or decision

Question 20

RISK, REPUTATION, AND STRATEGY - THE MEANING OF RISK APPETITE

What is risk appetite?

How may someone who is risk averse behave? What is the downside?

How may someone who is a risk-seeker behave? What is the downside?

What is risk capacity?

What is risk tolerance?

Answer 20

Risk appetite = defines the approach of an organisation to risk. Where do they sit on the spectrum that exists between risk-aversion and risk-seeking?

A RISK-AVERSE person looks for certainty of outcome and is therefore prepared to sacrifice opportunities that might exist for change.
(Risk aversion can often lead to an intolerance of challenge and therefore an
overreaction to any threat to the status quo)

A RISK-SEEKING person accepts that life is full of options and uncertainty, and such a person has confidence in using their abilities to counter whatever they may face.
(Risk seeking can often lead to a dangerous dismissal of the realities that confront a person or organisation)

Risk capacity = the maximum level of risk that can be taken, and often that is required to be taken, to achieve the intended strategic goals; it might describe the difference between actual risk being taken and the higher or lower levels of tolerance.

Risk tolerance defines the lower and upper level of risk that can be taken by an organisation, irrespective of its risk appetite = suggests the limits beyond which it would be dangerous for an organisation to go, under normal operating conditions

Question 21

RISK, REPUTATION, AND STRATEGY - THE MEANING OF RISK APPETITE

What is a risk-tolerance matrix?

What is a problem with a risk-tolerance matrix?

What is risk intelligence as suggested by Evans (2012)?

He suggests that anyone involved in the assessment of risk must develop what?

Answer 21

Risk-tolerance matrix = risks are plotted on a graph (relative impact on the y-axis and relative likelihood on the x-axis) = acceptable levels of tolerance are measured from the interaction of relative impact and relative likelihood

Problem = the origin of the criteria by which individual risks are judged, and therefore their position on the chart = judgement may be biased

Risk intelligence = operates in the area that exists between certain knowledge and complete ignorance = our job to find our place along this momentum for each risk scenario faced

develop the ability to gauge the limits of their own knowledge

Question 22

RISK, REPUTATION, AND STRATEGY - PERSPECTIVES OF DIFFERENT TYPES OF ORGANISATIONAL RISK

What are the 5 main types of risk?

ENVIRONMENT RISK

A range of reputational risks could be aligned against many aspects of environmental risk. Name an example.

How can this be mitigated?

Answer 22

1. Financial
2. Operational
3. Competition
4. Environment
5. People

A multinational organisation, with sites in many countries, is potentially open to the reputational risk of using transfer pricing to aggressively minimise its taxation, ‘fixing’ its tax affairs e.g., Apple and Amazon

The mitigation is to promote and adhere to clean, transparent operations

Question 23

RISK, REPUTATION, AND STRATEGY - PERSPECTIVES OF DIFFERENT TYPES OF ORGANISATIONAL RISK - FINANCIAL RISK

What is gearing?

What risks do high geared organisations have?

What risks do low geared organisations have?

How are financial risks mitigated? (4)

Name an example of an organisation that got its financial structure significantly wrong.

Answer 23

gearing is usually a combination of shareholding funding (equity) combined with debt (bank or similar)

High geared = higher debt than equity = risk of being unable to pay interest and/or capital back to lender (direct reputational damage with the lender)

Low geared = higher equity than debt = risk of loss of market value and reputation due market reaction to announcements made by company

(1) sound financial planning, (2) ensuring LT funding is matched appropriately to LT assets, (3) in high geared company = ensure appropriate levels of cash generation underpin financial performance, and (4) in a low geared company = take care in the timing and phraseology of public announcements

Carillion = used ST cashflows to fund LT projects

Question 24

RISK, REPUTATION, AND STRATEGY - PERSPECTIVES OF DIFFERENT TYPES OF ORGANISATIONAL RISK - OPERATIONAL RISK

Reputational damage can potentially affect what in terms of operations?

How can the risk of loss of reputation be mitigated from both perspectives?

Name 3 examples of reputational damage.

Answer 24

potentially affect both ends of the operational supply chain = (1) customers buy based upon perceived quality or product/service which is closely aligned to company’s reputation, and (2) suppliers are often keen to be associated with a company that has a positive reputation AND company can leave itself open to reputational damage if it fails to secure its supply base and cannot complete production

Customer perspective = use of customer-relationship management (CRM) systems, customer surveys and feedback and other such tools
Supplier perspective = sensible, calculated terms and a choice of potential suppliers

Examples of reputation damage from customer perspective = (1) Volkswagen emissions falsification and the (2) Starbucks corporation tax coverage
Examples of reputation damage from supplier perspective = KFC mishandled a strategic switch of logistics suppliers and was unable to serve chicken for a few weeks

Question 25

RISK, REPUTATION, AND STRATEGY - PERSPECTIVES OF DIFFERENT TYPES OF ORGANISATIONAL RISK - COMPETITION RISK

Why do all organisations face competition?

When can reputational damage arise? (2)

How can this be mitigated?

Name an example of mitigation in this area.

Answer 25

If a product or service is selling and generating profit/wealth, then other organisations will see an opportunity to compete and try to gain a share in that market.

can arise from (1) negative media reporting of the demise of a company’s share of a market, and (2) from competitors letting it be known that an alternative exists.

Mitigation can be in the form of assertive promotion or advertising, or a reliance on existing reputation

Example = in reaction to the loss of food-retail market share by Tesco/Asda/Sainsbury to Aldi/Lidl, mitigation seen through marketing campaigns asserting difference in quality and price matches

Question 26

RISK, REPUTATION, AND STRATEGY - PERSPECTIVES OF DIFFERENT TYPES OF ORGANISATIONAL RISK - PEOPLE RISK

Reputational risks can be improved or worsened by what?

Where does reputational risk from people arise?

How can this be mitigated? (2)

What are other reputational risks in the people category? (3)

Answer 26

by the behaviour and words of the leaders (and employees) of an organisation

The reputational risk from people arises from the larger public declarations, gossip, and one-to-one conversations that take place between people

Mitigation within an organisation comes from:
(1) a firm policy on communication outside the organisation, and the development of a culture of joint ownership = people likely to be more careful when they feel responsible and accountable
(2) reminding staff how to handle approaches by reporters, and to be careful about what is said in the public domain

1. allegations of people mistreatment
2. outspoken leaders = Ratner’s jewellers CEO who bad mouthed the quality and products
3. personal reputations of individuals = Elon Musk with Tesla

Question 27

RISK, REPUTATION, AND STRATEGY - DIFFERENT CONTROL TOOLS FOR THE MANAGEMENT OF RISK / - KPIs

What are the 4 different control tools for the management of risk?

What are the 4 core requirement to be able to use KPIs for the measurement, assessment and control of risk?

Answer 27

1. KPIs
2. Risk register
3. Risk matrix
4. Balanced scorecard = many uses of a balanced scorecard is the oversight and control of risk

(1) a closely defined set of measures
(2) accurate trusted data to ensure integrity
(3) measures that are strategically relevant
(4) indicators that have a forward impact = something will be done as a result of the measure.

Question 28

RISK, REPUTATION, AND STRATEGY - DIFFERENT CONTROL TOOLS FOR THE MANAGEMENT OF RISK - RISK REGISTER

What is a risk register?

To add organisational value, the risk register needs to be what?

The size and complexity of a risk register is usually based on what? (3)

Answer 28

Risk register = formal framework/structure to list, categorise, and weight the multiplicity of risks that an organisation faces = a means of recording risks identified, and how they are controlled and mitigated

A living and vibrant tool rather than formulaic and background compliance task

based on the management level driving the initiative, the interest level of the person entrusted with the compilation, or alternatively by the availability of budget and/or technology for this purpose

Question 29

RISK, REPUTATION, AND STRATEGY - DIFFERENT CONTROL TOOLS FOR THE MANAGEMENT OF RISK - RISK MATRIX

Why will some organisations use a risk matrix structure?

What are the advantages of such a matrix?

What are the disadvantages?

Answer 29

to analyse the severity of a risk against its probability = often known as a ‘red amber green’ or ‘traffic light’ matrix to identify risk severity

Advantages = it is easy to develop and understand and creates a useful visual image of risk within the organisation

Disadvantages = it has no timeframe, no concept of the volatility if risk, and no indication of the basis of the underlying data that has been used to generate the image

Question 30

RISK, REPUTATION, AND STRATEGY - WHAT ARE WE TRYING TO CONTROL?

Under the 2018 UK CG Code, what should the board establish?

It is generally accepted that any such control process will include which 3 dimensions?

Answer 30

Principle O = establish procedures to manage risk, oversee the internal control framework, and determine the nature and extent of the principal risks the company is willing to take in order to achieve its long-term strategic objectives

1. Identification = how do we know what the risks are and how frequently are we able to perceive new or different risks?
2. Evaluation = the establishment of potential impact from the alignment of probability and materiality.
3. Mitigation = the progress of measures taken to control and reduce potential impact while recognising that risk is still a necessary and intrinsic part of the strategic growth of any organisation.

Question 31

RISK, REPUTATION, AND STRATEGY - REPUTATION MANAGEMENT

How can reputation be defined?

How is it described from a financial perspective?

There is a need to regularly consider how the organisation is viewed by the diverse range of stakeholders. How can this be done?

What are the 3 distinctive relational capabilities that allow an organisation to achieve competitive advantage according to Kay (1993)?

Answer 31

Reputation = the beliefs or opinions that are generally held about someone or something
= reputation of an organisation or person is based around the (accurate or inaccurate) opinions held and developed by one or more other people

= an intangible asset and equates to the amount that a person or an organisation is willing to pay above or below the accounting value

By market research

1. Architecture = the network of relational contracts, both internal and external.
2. Reputation = the assurance to stakeholders of quality through the interrelationship of experience, signalling and promotion.
3. Innovation = a perception of how far ‘ahead of the game’ a particular organisation is at any moment in time

Question 32

RISK, REPUTATION, AND STRATEGY - REPUTATION MANAGEMENT

An important aspect of the strategic governance responsibility is to establish a means for directors to become aware of potential risks affecting the reputation of the organisation.

What are the 7 categories these risk may fall into?

Answer 32

1. Economic = a change in consumer demand, or the reduction of sales through poor media reporting.
2. Natural = an internal failure within the organisation which the directors have failed to consider, such as a gap in procedures.
3. Operational = pursuance of unsafe practices, for instance with regard to health and safety.
4. People = the perceived treatment of employees and others.
5. Governance = the ethical dimensions and the values of the organisation.
6. Human = the causing of damage or offence to an individual resulting in court or other public action.
7. Commercial blindness = for example, the acceptance of a customer of higher than usual risk to facilitate a higher fee.