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12 Pitfalls to Avoid on the Path to Managing Reputational Risks

Authors: Henisz, Witold J.


Date: First Quarter 2016

Tags: risk management, corporate diplomacy, stakeholder engagement, DIPLOMat, due diligence

Engaging with your external stakeholders is an essential means by which companies not only reduce risk and preempt future crises, but also generate value for shareholders and society alike. So why do executives appear to ignore “corporate diplomacy,” which in many ways is one of the best resources in the executive toolkit to help manage risk effectively? Drawing on his DIPLOMat framework, the author answers this question by showing the myriad ways that executives are frequently stymied in their efforts to maximize their stakeholder potential. He sketches out the 12 biggest risks to avoid. By identifying the main risks in the stakeholder environment, executives can mitigate their adverse impacts and seize their upside opportunity.

Tools and Frameworks:
> “Becoming a Corporate DIPLOMat” defines six elements that are key to winning the hearts and minds of external stakeholders in support of an organizational mission.
> The article sketches out the 12 biggest pitfalls to avoid when designing and implementing corporate diplomacy.

Examples Cited:
Shell, oil and gas prices, Indian government, Chevron Nigeria, Tintaya mine in Peru, community leader in Peru who closed down road access to a local mine, Rio Tinto mine in Bougainville, Papua New Guinea, a hotel in Bali

Research Basis:
Based on research by the author contained in his book Corporate Diplomacy: Building Reputations and Relationships With External Stakeholders (Greenleaf, 2014).

About the Author:
Witold J. Henisz is the Deloitte & Touche Professor of Management at The Wharton School, University of Pennsylvania, and Principal at the political risk management consultancy PRIMA LLC.


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