Private Equity Administrators (PEA) asks, what can an LP do to limit reputational risk?

Following our series of blogs looking at transparency in the Private Equity world we’d like to talk to you about reputational risk and what that potentially may mean to your LPs.

There is always a reason why certain themes start trending across sectors and the Private Equity community is no exception. GP communication is clearly a concern for a number of Limited Partners and we all know with poor communication there is exposure to risk, many types of risk, in-particular reputational risk.

Reputation is a fragile asset as much about perception as it is about fact. An asset that can take years to build, with social media, blogs and the relentless 24hr internet and TV news animal, can be destroyed in a matter of a few clicks.

Reputation encompasses so many corporate concepts around culture, values, integrity, mission, ethics, social responsibility, trust and relationships that monitoring exposures to reputational risk can be disconnected. The Board are usually in the limelight for owning reputational risk but responsibility for the day to day implementation of the risk management strategy lies with senior management … and there lies our first disconnect. How many GPs out there have a reputational risk framework incorporating not only their own drivers but that of their LPs… and there lies our second disconnect.

Companies are always least prepared for risks beyond their direct control. So what can an LP do to limit their exposure to reputational risk?

    • Separate out your reputational risks into a category of their own
    • Communicate your procedures for monitoring reputational risk to your GPs
    • Collect data or risk sense media hits to encompass social media, blogs and news sites and understand the value of your brand to assess the consequences of reputational impact
    • Ensure there is strong strategic and cultural alignment within your firm
    • Commit to quality in reporting and communications with key stakeholders
    • Review your controls and performance against your competitors; and
    • Develop a solid crisis communication plan and engage a crisis communications firm with out of hours availability.

It takes 20 years to build a reputation and 5 minutes to ruin it. If you think about that, you’ll do things differently – Warren Buffet.

We really enjoy communicating, so let’s talk.  For a deeper discussion on how you can align your reputational risk concerns with your GP, feel free to call James in Guernsey or Peter in Denmark if you would be interested in hearing more:

Guernsey James Orrick, Managing Director

+44 1481 730988 jo@peadm.com

Denmark Peter Toyberg, CEO

+45 70 20 40 61 pt@peadm.com

Further reading:

Tylenol murders a lesson in reputation management – http://www.mallenbaker.net/csr/crisis02.php

Deloitte – Reputational Risk Survey

Protiviti – Ten keys to managing reputational risk

 

 

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