Considering potential threats to an organization's reputation as part of the strategic planning process can help reduce such risks and even position a company to enhance its reputation by allowing it to prepare an effective response when an event occurs.

“I think there is a very powerful connection between strategic risk management and reputation and brand management,” said James W. DeLoach, managing director at consultant Protiviti Inc. in Houston.

“As we view certain events over the last several years, we have come to realize even the best household names, the best brands face their moment of crisis. No company is immune to the risk of a crisis,” Mr. DeLoach said.

And reputation-threatening crises can take any number of forms, said Corey Gooch, senior enterprise risk management consultant at Towers Watson & Co. in Chicago. “Reputation risk could happen from anything,” he said. “You could have a supply chain problem, you could have a labor issue, you could have a cyber attack.”

From a strategic risk management perspective on risks associated with strategic decisions, it's important not just to consider those exposures' potential financial impact on the organization, “but also the potential impact on your reputation should something occur,” Mr. Gooch said. “I don't think you can simply look at a risk as what's this going to mean financially.”

Gregg Anderson, a director at Crowe Horwath L.L.P. in Chicago, said companies' historical approach to addressing risk has focused on the financial impact. “Reputation risk is sort of asking the question, "How do people or employees or investors perceive the reputation of the company,'” Mr. Anderson said. “I think historically people looked at reputation risk as something (public relations) people and attorneys deal with.”

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Larry Walsh, vice chairman at the Alexandria, Va.-based Hawthorn Group L.C., said reputation crises often are the result of a disconnect between expectations and performance. “That to me is very strategic,” he said.

“The reputational impact of every decision has to be part of the checklist from product design to your practices to (human resources) policies,” Mr. Walsh said.

“There are multiple areas in a company that are constantly touching stakeholders either formally or informally,” said Nir Kossovsky, CEO and director of Steel City Re, a Pittsburgh-based broker/adviser specializing in corporate reputation management and risk transfer.

Stakeholders' expectations of the company can be violated by something as simple as an internal human resources policy perceived as culturally insensitive, Mr. Kossovsky said. And social media or blog posts can quickly spread those perceptions, “which is why we always say reputation is not a PR issue, it's a governance and control issue,” he said.

At the heart of efforts to address reputational risk at the strategic level are an organization's values, Mr. Walsh said.

“It's going to be values that drive decisions and drive behavior, and that's got to be tied to compensation and rewards,” he said.

Mr. Gooch said that when consulting with clients, he tries to look at reputation risk not so much as an exposure unto itself but as an impact outgrowth of something else that could go wrong. “I think it's important that reputation risk get looked at as a component of any risk,” he said.

Using strategic risk management to focus on risks that might prevent an organization from achieving its strategic goals, one understands that the impact of reputational damage from an event might be greater than the direct financial loss, Mr. Gooch said.

Citing the example of a company's reputation being damaged by a misstep in a particular market he said, “If one of those strategic areas was to grow this market, now you've significantly damaged your ability to achieve that strategy.”

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Considering reputational risks that might be associated with other exposures could lead a company to view those exposures as more significant in setting strategy, Mr. Gooch said. “That might actually lead to risks that might not be as high in a strategic risk management or enterprise risk management context getting bumped up the list,” he said.

While considering reputational risk as part of strategic risk management can help organizations avoid or minimize such threats, it also can help them burnish their reputations by positioning them to effectively deal with crises when they do occur.

Organizations can identify situations that could couple high impact with high velocity — a rapid onset that involves senior management in a crisis situation almost immediately — along with persistence, Mr. DeLoach said, then make sure that a crisis plan and crisis management team is in place to deal with them.

“The marketplace really respects organizations that know how to manage a crisis,” he said. “That bolsters reputation.”

Mr. Gooch offered a similar view.

“You can actually come out of a situation with an enhanced reputation if you respond well to it,” he said. A reputation-threatening event “can be an enterprise killer or it can add value to a business depending on how well you're prepared to respond to it.”