Skip to main content
Article

Is your reputation in the manufacturing sector at risk?

Casualty
N/A

July 28, 2021

Manufacturing is a fundamental element of many businesses and while much of an organisation’s reputation hinges on the quality of their product, other reputational drivers can impact their continued success.

Manufacturers rely on brand and reputation to establish the value of their product in the eyes of the consumer, ultimately affecting their success in the market.

Whilst much of a manufacturer’s reputation hinges on the quality of their product, the effective management of other reputational drivers is essential to long term resilience.

Whether you produce textiles, food, beverages, furniture or consumer electronics, brand and reputation is central to the value placed on your product.

Reputation compromises more and more of any global company’s market capitalisation, and is determined by how customers, competitors and other stakeholders perceive your business.

It takes a lot of time and effort to cultivate a positive reputation, but it can often be damaged by the repercussions of a single event.

When considering the correlation between reputational reliance and maintaining core business processes and procedures, or managing brand associations, many businesses don’t have a complete picture of the exposures they face and effect these could have on future profit.

Furthermore, manufacturers typically insure against the legal repercussions of a reputational event, but most do not have a method of protecting against the direct financial implications of a crisis.

Unsafe or unhygienic working conditions

Manufacturing is often inherently dangerous, involving heavy machinery, harmful chemicals, or focussing on near work for prolonged periods.

Organisations need to ensure they have systems in place to mitigate the risks involved with manufacturing.

A high-profile garment factory collapse in 2013 killed over 1,100 people and sent shockwaves through the fashion industry.”

Richard Sheldon
Willis Towers Watson

A high-profile garment factory collapse in 2013 killed over 1,100 people and sent shockwaves through the fashion industry.

The case led to regulatory review to protect workers going forward, however many international brands suffered reputational repercussions due to poorly regulated factories in their supply chain.

A growing concern for technology manufacturers is the governance around the mining of metals and minerals used in smart devices, which often happens in underdeveloped or unstable areas.

The Organisation for Economic Co-operation and Development’s (OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas1 helps companies discover whether their supply chains could be linked to conflict finance and other risks.

Manufacturing organisations must ensure they have taken the steps necessary to minimise the risk of harm to workers in their supply chain.

Along with costs involved in compensation and damage caused by these sorts of events, companies are at risk of ongoing reputational damage and concurrent loss of profits.

Sale of harmful products – physical injury / property damage

When the safety of a product is bought into question there is an immediate effect on the manufacturer’s reputation, especially if it causes death or injury, is subject to product recall or causes damage to property.

A major international homeware manufacturer found themselves in this situation, with around 150 injuries reported due to tipping furniture, including several child deaths.

Whilst a recall campaign and issuance of a wall anchor was effective remedy to the immediate safety risk, there is no doubt consumer sentiment towards the brand would have suffered.

It’s often the way an organisation responds when something goes wrong that impacts their reputation most.

It’s often the way an organisation responds when something goes wrong that impacts their reputation most.”

Kevin Velan
Willis Towers Watson

Access to a crisis management expert can help minimise the impact to your reputation by overseeing the situation and ensuring responses are carefully coordinated.

Even then, there may be an impact on sales and company profit, so effective risk transfer is essential in addressing the threat posed by a product safety issue.

Damage by association

Your reputation can be damaged by both direct endorsers and people in the public eye who aren’t necessarily linked to your brand.

Your reputation can be damaged by both direct endorsers and people in the public eye who aren’t necessarily linked to your brand.”

Richard Sheldon
Willis Towers Watson

At the 2020 Euros, a high profile player moved a sponsor’s soft drink out of shot during a post-match interview, commenting that they prefer water.

The company’s share price temporarily dropped following this event, raising questions over the obligations of competitors taking part in an event with respect to corporate sponsors.

Brands need to explicitly outline promotional expectations within their contracts for sponsorship and endorsement deals, especially when sponsoring an event – factoring in the actions of the individuals taking part.

Bringing manufacturing to the US

Over recent years we’ve seen several large manufacturers bringing production back to the US.

This has been accelerated by disruption caused by the pandemic and the US government’s review of supply-chain vulnerabilities in semiconductors, critical minerals used in electronics, large-capacity batteries for electric cars and vital medical equipment.

The reputation of organisations repatriating manufacturing capacity rides on smooth relocations and understanding the nuances of political landscapes they take place in.

If they unwittingly create production delays or are forced to increase prices, consumer frustration will become rapidly apparent.

Separately, balancing the potential political issues with manufacturing nations and the goodwill generated by job creation in the west is important in maintaining reputation with international customer bases.

Protecting your reputation

Managing your reputation involves having your finger on the pulse at all times – not just when a crisis occurs.

That means knowing what’s being said about your organisation in the press, on social media and by other organisations you’re associated with.

At Willis Towers Watson, we have a reputational crisis insurance and risk management solution that means you can discover, mitigate, control and repair reputational damage as it happens.

At Willis Towers Watson, we have a reputational crisis insurance and risk management solution that means you can discover, mitigate, control and repair reputational damage as it happens.”

Kevin Velan
Willis Towers Watson

Powered by Polecat, live sentiment and impact analysis means you can stem the tide on reputational damage before an event escalates and be confident that any drop in profit as a result, is covered.

You will also have access to crisis consultants, paid for by insurers, who can advise you when a crisis occurs to help you handle it as well as possible.

The insurance element of the product is triggered by the occurrence of a reputational crisis event.

It provides indemnity for loss of profit and the costs of brand rehabilitation, designed to help you recover financially from a crisis.

For more information about our reputational crisis insurance and risk management solution and to arrange a free initial consultation, please contact:

Source

1 https://www.oecd.org/corporate/mne/mining.htm

Contacts

Kevin Velan
Director, National Product Recall Team

Richard Sheldon
Willis Towers Watson

Related content tags, list of links Article Casualty Manufacturing

Related Capabilities

Contact Us