Ben Smith, Founder, PRmoment.com
As all communications professionals know, a company’s reputation is one of its most valuable assets, especially when the political climate is changeable. This is backed up by the latest study by intangible asset specialists Reputation Dividend, which reveals that the value of UK company reputations reached a new high in 2017, with the combined value of corporate reputations in the FTSE350 rising to £986bn in January 2017, or 39% of all shareholder value, the highest recorded since tracking by Reputation Dividend began ten years ago.
The top ten key findings
- Royal Dutch Shell displaces Unilever in the top slot of reputation value
- The biggest riser in this year’s Top Ten in terms of having a valuable reputation was GlaxoSmithKline (up 10.1% points to 49.6%)
- Another big mover in the Top Ten is Diageo (up 6.6% points to 49.4%) which jumped 18 places
- BP jumped 19 places (up 6.4% points to 49.1%)
Despite the positive results of this year’s study, companies should not be complacent, says Simon Cole, founding partner of Reputation Dividend, as the future may not be so bright: "Whilst the increase is a clear testament to the effectiveness of reputation management, thus far, it also raises an amber warning light.
“Corporate valuations are currently riding high, over-heated some would say, as investors have found themselves pressured to become more accepting of risk. Share prices have been forced up by the stress of returns and, more recently, US cash looking for European opportunities. As such, they're prone to knocks to individual company stories or more likely, the kind of disruptive geo-political events that seem to be occurring all too regularly these days.”
In terms of how communications professionals can help protect the value of corporate reputations, Cole says: “The growing challenge for reputation managers is to avoid the risk of a potential bubble and work to ensure any price deflationary pressure is limited to a correction and so minimised. All of which has considerable implication for messaging and strategic communications.
“Reputation assets are complex and vulnerable and the recent dislocation in the markets has increased the need to ensure that communications are focused on how elements of interest to investors match the prevailing strengths and weaknesses of different company properties. For example, the changes have resulted in companies' standings as 'magnets for talent' becoming the single most valuable component of FTSE company reputations in 2017 accounting for £130 billion of shareholder value, 15% of the combined reputation value. By contrast, corporate prowess as an 'innovator' remains a relatively low standing though still substantial contributor accounting for £72 billion across the index. Interest in that factor however is growing rapidly and has increased in the last 12 months alone to the point where its capacity to grow incremental value is up by 42%.”
As with all investments, value provided by corporate reputations can go up as well as down. Cole believes that in the present environment, the risks of value going down are significant. “If, when, the correction comes, or the bubble bursts, corporate valuations will come under increasing pressure to provide 'security' and reputation managers will need to focus their messaging on the reputational strengths and weaknesses that matter most with some precision if they're to weather any storms and maintain their influence. A great deal of credit is deserved for getting corporate reputations to the position where they are today but it cannot be allowed to foster any complacency with regard to the work ahead.”
So the message to those in charge of corporate reputations is “Well done!”, but tempered with a warning that maintaining reputation value could soon become much harder work.
Now in its tenth year, the 2017 UK Reputation Dividend Report summarises the health of corporate reputation in the United Kingdom and its impact on shareholder value. With similar analyses in the USA, the study determines how well, or not, reputations are working for companies by quantifying its value and drivers among the investment community.
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