As they move into new markets by product line or geographically, companies need to be wary of the reputation risks that can accompany missteps in those efforts.

Companies must recognize that with each new market come new stakeholders, and it's essential to understand those stakeholders' expectations, according to reputation risk experts.

In addition, it's necessary to recognize the speed and global range of today's communications and understand that news of flawed products, cultural insensitivities or other reputational threats can quickly reach a large audience.

The April collapse of an apparel factory in Bangladesh and the subsequent reputational risk exposure to European and North American retailers associated with it showed an example of reputation risks companies can face as they get involved in new markets.

Two separate Bangladesh factory safety plans announced last week by groups of European and North American retailers were driven to some extent by those reputational risks.

“From my perspective, reputational risk is not necessarily anything people are talking about but it's something that needs to be tied in to your business strategy in terms of new markets, new geographies,” said Gregg Anderson, a director at Crowe Horwath L.L.P. in Chicago. “It's not just looking at the return on investment.”

When moving into a new market, stakeholders who could affect the company's reputation could include customers, employees or regulators.

“When you move to a new geography, you need to understand the expectations of those different parties,” said Nir Kossovsky, CEO and director of Steel City Re L.L.C., a Pittsburgh-based broker/adviser specializing in corporate reputation measurement and risk transfer.

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For example, he said, a food producer moving into European markets must consider that many Europeans are sensitive to genetically modified foods.

“Then there are the implicit social expectations,” Mr. Kossovsky said, such as religious, cultural or historical issues. “There's still a lot of places in the world German companies can't do certain things because of certain memories of what happened in the Second World War.”

Companies moving into new product lines must address similar considerations. “It's pretty much the same mix,” Mr. Kossovsky said. In the case of entering new markets by product line or geography, companies must understand the expectations of stakeholders and prepare to meet them or respond if those expectations are not met, he said.

“When a company is now engaged with these new stakeholders, either by product or geography, it has to make sure that at the highest level of the company there's an understanding of what the risks might be,” Mr. Kossovsky said.

As they consider stakeholders in new geographic markets, companies also must consider the expectations of stakeholders in their home market, said Larry Walsh, vice chairman at the Alexandria, Va.-based Hawthorn Group L.C. U.S. and Western European companies can run into issues at home even though they comply with local rules, regulations and wage rates in foreign markets, he said.

“Because the rules and regulations (in foreign markets) are very different — very often more lax than U.S. laws or Western European laws — companies can live up to that and still get in trouble,” he said. “Their reputational issues, things that they do elsewhere, are going to be judged by the standards of their home country.”

With today's instantaneous global communications, “I think that's really the reputational risk, that you can't manufacture in Bangladesh, distribute in Bulgaria and bring the money back to Cleveland and not expect that anybody back in Cleveland or the U.S. is going to know what's going on in Bangladesh or Bulgaria,” Mr. Walsh said.

The Foreign Corrupt Practices Act poses another potential reputational exposure for companies moving into new geographical markets, Mr. Anderson said. While behavior such as gifts to local officials may be considered “business as usual” in the new markets, it could subject companies to legal and regulatory scrutiny in the U.S., along with the potential for reputational damage.

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Mr. Anderson said that as companies expand into new markets, techniques like enterprise risk management can be used to assess potential financial exposures of those ventures and the potential effect of various activities on companies' reputations.

While the speed at which information can travel through social media can enhance reputation risk, social media can be a valuable tool in managing reputation risks, said Shannon M. Wilkinson, CEO of Reputation Communications in New York. Social media audits can provide important information before a company enters a market, she said.

“Social media provides a barometer into all those kinds of things,” she said. “It can be done quickly. It can be done cheaply.”

Such social media research can provide information on perceptions of products, companies or marketing campaigns, as well as an opportunity to learn from competitors' experiences, Ms. Wilkinson said.

“They can go to Twitter and they can see what their peer group's doing,” she said. “It's a very good way of observing best and worst practices.”

It also can provide information on whether signing a particular celebrity spokesperson might be a big reputation risk mistake.

“He might be a face for a different kind of product, but not in this area,” Ms. Wilkinson said. “All of this is researchable and it's not so much about making a judgment; it's about determining what is the most appropriate affiliation for your company or your product launch.”