Reputation Risk: Steward a Valuable Asset
Estimated Reading Time: 3 minutes
By Rachel Sams
Lead Consultant and Editor
Resource Type: Risk eNews
Topic: Crisis Management, Crisis Communications
Has your nonprofit ever had a situation where part of your team felt that making a public statement on an issue could ruin your reputation, and the rest of your team felt that not making a statement could ruin your reputation?
Many nonprofit teams have, especially in recent years. When those disagreements arise, it can be helpful to remember that everyone at the table agrees on one thing: Your nonprofit’s reputation is precious, could be harmed by one bad decision, and your actions should protect it.
What is reputation? According to Rethinking Reputational Risk by Anthony Fitzsimmons and Derek Atkins, it’s the sum of how your constituents perceive you. Reputational risk, in their view, is the risk that constituents come to believe you are not as good as they thought you were. That could happen because of poor performance by your nonprofit, or because of the behavior of people associated with the organization.
In an era of political division and social media firestorms, it’s helpful to think through the elements of reputation risk—and how to close the gaps that may arise between how your nonprofit wants to be viewed and what you do.
Factors That Heighten Reputation Risk
Holding tax exempt status under Section 501(c)(3) of the Internal Revenue Code brings responsibilities, such as the responsibility to be organized and operate for exempt purposes, and ensure that the organization does not operate for the benefit of private interests. That status also means people hold nonprofit organizations and leaders to a very high standard.
The public expects nonprofit leaders will consistently live up to the sector’s “higher purpose.” Behavior they might tolerate in business or government might garner scorn in the nonprofit sector. That’s not a bad thing—all leaders, especially in the charitable sector, should observe a high standard of behavior. But it is something for your team to pause and consider as you make decisions: What would a constituent or outside observer think of a nonprofit making this choice?
Nonprofit organizations also frequently work with partners, from vendors to donors and suppliers. Nonprofit leaders may want to believe that when they outsource a task, they relinquish all the risks that accompany it. But you can’t divest reputation risk. If there’s an outbreak of food poisoning at your gala, many people will shudder at the thought of attending next year, even if you hire a different caterer.
Reputation Risk Management Strategies
The best way to protect your reputation is to open up every possible channel for leaders to receive bad news.
This is a challenge. The power of a C-suite title makes many employees and some outsiders hesitate to tell leaders things they don’t want to hear—but need to. Ask yourself and your teams these questions:
- What barriers at your nonprofit (culture, incentives, social norms) prevent bad news from traveling to people who need to hear it?
- How are messages massaged or re-interpreted before being passed on?
- How can you stop these things from happening? Revisit the last time early warning signs of a problem didn’t make it to leadership. Reverse-engineer the situation. What could your team have done to invite that information?
- Which of your constituents might distance themselves from you in a crisis? Why? How can you build trust with those constituents?
- What nonprofit does your team most admire? What do you admire about the organization? How can you cultivate similar qualities in your organization?
For more on this topic, join NRMC Assistant Executive Director Elyzabeth Joy Holford at our Risk Summit in Reston, Virginia October 27-28. She’ll explore these issues and many more in depth at her session on reputation risk.
As you can see, protecting your reputation isn’t just about messaging, although that’s important. It’s about looking within your nonprofit and its community to see where trust is weak and could fray—and how you can reinforce it.
Rachel Sams is Lead Consultant and Editor at the Nonprofit Risk Management Center. Reach her with thoughts and questions about reputation risk at rachel@nonprofitrisk.org or (505) 456-4045.
“First let me congratulate you on a conference well done. I had a great time at the Nonprofit Employee Benefits Conference and walked away with some valuable tools and questions that we’ll need to be addressing in both the short and long term. Thanks to you and your staff for all you do to provide us with quality resources in support of our missions.”
— Scott Brown, Mohonk Preserve
“BBYO’s engagement of NRMC to conduct a risk assessment was one of the most valuable processes undertaken over the past five years. Numerous programmatic and procedural changes were recommended and have since been implemented. Additionally, dozens (literally) of insurance coverage gaps were identified that would never have been without the work of NRMC. This assessment led to a broker bidding process that resulted in BBYO’s selection of a new broker that we have been extremely satisfied with. I unconditionally recommend the Center for their consultative services.
— Sidney Abrams, BBYO
“Melanie Herman has provided expert, insightful, timely and well resourced information to our Executive Team and Board of Directors. Our corporation recently experienced massive growth through merger and the Board has been working to better integrate their expanded set of roles and responsibilities. Melanie presented at our Annual Board of Director’s Retreat and captured the interest of our Board members. As a result of her excellent presentation the Board has engaged in focused review which is having immediate effects on governance.”
— Pamela Mattel, Basics Promesa Systems Inc
“The Nonprofit Risk Management Center has been an outstanding partner for us. They are attentive to our needs, and work hard to successfully meet our requests for information. Being an Affiliate member gave us access to so many time- and money-saving resources that it easily paid for itself! Nonprofit Risk Management Center is truly a valued partner of The Community Foundation of Elkhart County and we are continuously able to optimize staff time with the support given by their team.”
— Jodi Spataro, Community Foundation of Elkhart County
“The board and staff of the Prince George’s Child Resource Center are extremely pleased with the results of the risk assessment conducted by the Nonprofit Risk Management Center. A thorough scan revealed that while we are a well run organization, we had risks that we never imagined. We are grateful to know that we have now minimized our organizational risks and we recommend the Center to other nonprofits.”
— Marti Worshtil, Prince George’s Child Resource Center
Great American Insurance Group’s Specialty Human Services is committed to protecting those who improve your communities. The NRMC team has committed to delivering dynamic risk management solutions tailored to nonprofit organizations. These organizations have many and varied risk issues, hence the need for specialized coverage and expert knowledge for their protection. We’ve had Melanie speak on several occasions to employees and our agents. She is always on point and delivers such great value. Thank you for the terrific partnership and allowing our nonprofits to focus on their mission!