19 September 2005

Reputation Risk: Is Murphy to Blame?

Any board member or executive today is well aware of the direct impact an adverse event or significant business disruption can have on shareholder value and customer confidence. When it does happen, how many people just throw up their hands and shout, Murphy's Law!

Murphy's Law ("If anything can go wrong, it will") was born at Edwards Air Force Base in 1949 at North Base.

It was named after Capt. Edward A. Murphy, an engineer working on Air Force Project MX981, (a project) designed to see how much sudden deceleration a person can stand in a crash.

Murphy is all about managing the "What if's" and planning for their possibility. Here is an example. Are you moving your business sometime soon? What is the possibility that when you do, you will be able to use your e-mail the day you open your new doors? More than one business has been subjected to the Law's of Murphy whenever a complex and logistical project or program is underway. If you are one of those corporate executives who has been unable to use your e-mail or web services the Monday after the big office move, you are not alone. The question is not that it could happen, it's what impact will it have on both customer and employee satisfaction the day it happens, and beyond.

This Corporate Board Member article sums up the impact of Reputation Risk on your organization.

While every Board member knows the importance of managing Enterprise Reputation Risk, the task seems overwhelming. Some Boards are not even trying to proactively manage the risk: their companies will be forced to rely on “reactive” measures after the Reputation Risk event has occurred. These after-the-fact public relations initiatives are expensive and often ineffective. And, since they are event-directed, they don’t provide an ongoing risk structure for the company to identify and control other issues which can cause Reputation Risk. Considering the enormous loss of both financial and franchise value which accompany Reputation Risk, is a Board which only reacts to risk events really doing its job?

In your future planning to mitigate the Operational Risks associated with Murphy and your reputation, we are reminded of a few of our favorite Murphy's Laws:

1. Computer systems are unreliable, but humans are even more unreliable. Any system which depends on human reliability is unreliable.

2. If there is a possibility of several things going wrong the one that will cause the most damage will be the one to go wrong.

3. A difficult task will be halted near completion by one tiny, previously insignificant detail.

4. High speed chases will always proceed from an area of light traffic to an area of extremely heavy traffic.

5. Every emergency has three phases: PANIC... FEAR... REMORSE.

Do you think you're spending too much time with your team planning? You haven't. Success in your organization doesn't happen because everything goes according to the plan. It happens because you were prepared when things go wrong. The organizations whose team has planned for every possible scenario and trained together in live simulations will become the most successful. Their missions will be accomplished on time and within budget.

Incidents of different severity and frequency are happening around you and your organization every day. Would your employees know what an incident looks like let alone know what to do next to mitigate the risk to them and the organization?

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