Analytics for Reputational risk

Source:- ACL Blog


The use of analytics for risk assessment and management typically focuses on financial related risks. Procurement-to-pay, purchasing/travel cards, general ledger activity and payroll are all common areas of application. The application of analytics to these structured data sets, i.e., data organized in rows and columns with clear headers, is an important step to managing financial risk.

However, there is another type of risk that analytics can be used to address, and it is also very important: reputational risk. An organization’s reputation may very well be its most valuable asset. Damage to an organization’s reputation can have a direct impact on its bottom line, ability to grow and, in some instances, ability to continue as an organization. Determining an effective way to manage this risk is a challenge to most organizations. Most often done through public relations and marketing, there is another way to help manage this risk: analytics.

Available Data

How can analytics be used to manage reputational risk? By leveraging data that addresses the organization’s reputation. This data is most commonly available in public forums where customers, critics and others are discussing an organization. In 2016 that means social media activity, blog posts, message board discussions, internal email communications and review sites. These data sources contain large amounts of unstructured data, i.e., data that is not organized in a column/row structure, most often free-form, generated by humans and contextual in nature. The important takeaway here is that these data sources are just that, data sources. They contain data just as the financial systems commonly analyzed contain. The difference is the initial capture and ingestion of the data. There are now a variety of tools designed to capture this information and prepare it for analysis. Ignoring these data sets because they are unstructured is a mistake.

Application of Analytics

Analytics for managing reputational risk fall into two categories, quantitative and qualitative.

Quantitative Analytics

Some important information about the reputation of an organization can be derived from quantitative analytics. These include:

  • Conversation Drivers: identifying who is talking the most about the organization can show who controls how your organization is viewed.
  • Conversation Influencers: identifying the posts, comments and articles that are most shared and viewed can illustrate who influences how your organization is viewed.
  • Activity by Date/Time: correlating online conversation about your organization with key events helps to determine what activities have generated excitement in the market.
  • Early Warning System: sentiment always precedes action—analytics can help detect the beginnings of erosion in favorable sentiment that may be a precursor to a more damaging incident.

 Qualitative Analytics

The information derived from qualitative analytics helps identify how the organization is viewed, i.e., the reputation. These include:

  • Sentiment Analysis of Activity: analyzing the positive/negative aspect of the conversation helps provide an overview of the overall conversation related to the organization.
  • Geographic Issues: monitoring the positive/negative tone of the conversation by location can identify issues specific to a particular location in the market.
  • Issue Identification: combining sentiment analysis with topic mapping provides a means to identify specific topics resulting in negative sentiment.
Putting it All Together

While all of the analytics described above are individually beneficial, combining the quantitative analytics, qualitative analytics and existing financial based analytics, allows you to create a detailed analysis of you organization’s reputation. For instance, you can identify the negative issues in the market, the specific location of the discussion and related events from within your organization.

Applying analytics to reputational risk provides a means for your organization to address potential issues in the market before they turn into crises.

Monday, February 8, 2016 In: Hot Topics Comments (None)

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