As the name suggests, reputational risk is a major risk to the reputation of a company. When working in a community, you have to be immensely careful about your company’s reputation. Any harm to the reputation acts as a trust breach, and you lose customers. If you do not identify reputational risks and manage them per need, it may cause reputational damage. While you can try to recover the damaged reputation, it comes at a cost.
As it is said, “Precaution is better than cure.”
How to Mitigate Reputational Risk
Let’s look at all the possible strategies that you may apply to mitigate reputational risk.
Quality Check
One of the major reputational risk causes is quality downfalls. When the quality of your product is not up to the mark according to the customer’s expectations, it may cause damage to your reputation. The consumer may ignore the mishap a few times. Yet, you might lose a loyal customer base if it is not regulated properly. It also reduces the possibility of engaging more customers with the brand when another company makes a better place in the business.
Happy Employees
Another important internal aspect of mitigating reputational risk is happy employees. A company is known for how it treats its employees. And with people standing up for the rights of employees more than ever before, it isn’t easy to keep your name high if you do not treat your employees right. An employee is the first-hand reviewer of the company. If you wish to maintain a reputation and decrease the risk, do not forget to keep your employees happy.
A happy employee is the best testimonial for your business!
Improve Customer Service
According to Nextiva, around 56% of people globally do not buy from a brand because of a previous poor customer service experience.
Good customer service can hide many of your company’s flaws as people want their complaints to be heard and validated. Similarly, bad customer service can seriously harm your business. The best way to avoid this is to recruit people who are the best for your company. If you are an apparel brand, it would not be the best idea to have customer service representatives who have only worked for software. Your representatives must not only have customer service experience but also of the particular niche you work in. One simple way is to offer a short training session before the employees begin their job to give them enough knowledge about your brand. It helps avoid blunders that may happen otherwise.
Data Protection

Reputational risk does not only arise from internal factors. But also external types of reputational risk like a breach of privacy can be harmful. Sometimes, the competitors try to steal your data by breaching your privacy. Leak data can result in serious damage to your business in terms of reputation and finances. Thus, it is important to keep your data protected. A few steps that you may take to prevent reputational damage include:
- Allowing data access to only authorized and highly trusted people
- Appointing cyber experts to encrypt your data and save it from being stolen
- Using tools that can inform you of any suspicious activity to save your business from data breach harm
- Lastly, you must have a team of professionals ready to fight such situations and recover data
- While it is essential to protect your data and save it from theft, it is also important to have a Plan B if anything such happens.
Observe Social Media
In an era where over 3.5 billion people use social media globally, news spreads like wildfire.
Whether a brand makes a huge hit or a mistake, everyone talks about it in a space accessible to hundreds and thousands of people at once. Keenly observing social media is a critical part of mitigating reputational risk. If the first negative review is not managed properly, you might find many more floating on social media platforms in just a few days. A business must have a social media or community manager who makes sure that everything that goes on social media about your brand is “good” from happy customers. You must try to keep your brand name dissociated from words like “poor” and “bad.”
The Bottom Line
Reputational risks can be significantly harmful if not managed in time. You can prevent reputational damage by identifying reputational risks, keeping a keen eye on social media, improving customer service, and ensuring the quality of your products, among other measures. Now that you know how to mitigate reputational risk, utilize the given strategies to reduce the risk as much as possible and improve your brand’s reputation.



Matthew is a Co-Founder at BusinessFinanceArticles.org. Matthew was a floor manager at a local restaurant in Wales. He lost his job after the pandemic and took initiative to make a team and start the project.
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