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Domino-Effect

Most of the times, the majority of organizations prepare a crisis management plan covering possible risks and threats that might affect their reputation or their business continuity. They focus on internal and external factors related to the operations of the organization. In my opinion there are four general categories of factors that might cause a crisis:

  • The macro-environment including political, economic, social, technological, environmental, intercultural, environmental, ethical, educational, physical, religious, regulatory, and security factors (see relevant post)
  • The sector of the organization
  • External specific factors related to the organization such as partners, local community and so on
  • The operations of the organization and the internal processes

In this post, we will focus on the role of a sector’s reputation and its effect on the reputation of the organization. Even if an organization makes what’s necessary to protect and promote its reputation, the perception of the public about the activity of the whole sector might ruin more or less the reputation of all the involved parties.

The negative reputation of a sector is the result of a common practice of the involved parties or the practice of the leading powers of the sector that the public opinion has denounced. The first case is rare because most of the times sectors with general and common bad practices are finally regulated or the sector as a whole decides to make a big change.

On the other hand, the activity of one organization might have a huge blow on the reputation of other organizations of the same sector. Two examples that come to mind are the oil & gas industry and financial & banking sector. The Exxon Valdez and BP oil spills have tarnished the reputation of the whole sector. The impact of bankruptcy filing by Lehman brothers had an immense effect in the market and initiated a domino effect that hit all the global finance firms especially the ones from the US. The impact was not only financial but reputational as well. Apart from the real issue that had to do with the exposure to the mortgage market, the finance firms lost their credibility and the trust of investors and the general public.

The domino effect along the lines of a sector might prove even graver for the reputation of an organization. There are issues that might evolve into a crisis if we do not realize that the organizations operate according to the principle of connected vessels.

You may find below five tips how to deal with imported issues and crises from other organizations of the same sector:

  • Examine the mistakes of the competition and be prepared to deal with them as if they are yours
  • Differentiate yourself from the rest of the sector in terms commercial operations and communication
  • Find good benchmarks and best practices from other sectors
  • Be open and transparent to society
  • Invest in Corporate Social Responsibility programs that contribute to society

The opinions expressed in this article are those of the author, and they do not reflect in any way those of his various affiliations.

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