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Failing to address reputational risks

By: Indwe Specialist Risks

Everyone should be aware of the product recall issued by Ford South Africa, in respect of the Ford Kuga 1.6 models. This matter has been steadily building up over the past twenty-four months and, as each incident unfolded and each claim was either paid or not paid, the manufacturer and customer base were building up their respective files of evidence. It has become blatantly clear that there is a problem with the vehicles and the question being asked is: Did the company handle the reputational risk well, poorly or indifferently?

Ford is not the only motor manufacturer to have experienced serious recall issues, as just about all the world’s major motor manufacturers have at some point dealt with similar situations. There have been cars that won’t stop, cars that have burst into flames after minor accidents, and cars that have engaged “drive” without human interaction. So in reality, product recalls are an inherent part of the motor industry.  

The issues at hand then are more about the process of reputational risk management and how well these are applied in a society that is always connected. Firstly, social media and the Internet have changed everything and nothing is kept secret anymore. If a customer realises there is a problem with their vehicle, it is easy to search online to find out if the issue is global and if it’s specific to a vehicle manufacturer or model. This customer can go public and invite others to contribute their stories or views and in days, weeks or months a powerful adversary is built up.

Secondly, customer perception is more powerful than reality and so the domino effect of poor reputational risk management may be felt for months or even years. It is vital that all available evidence be reviewed and the estimated knock-on effect of future sales, whether by model or for the total brand, be calculated and discussed. The relatively high cost of recalling and remedying defects will pale in comparison to the impact of brand damage on future sales.

When a brand remains silent in these unfortunate situations, it inflames conjecture – typically of the worst kind. This is why media crisis management across all media channels is essential, as you can turn a calamity into a massive business opportunity.

In reality no one believes cars, like software and smartphones, are completely defect or bug free, the focus is rather on how the manufacturer deals with the situation. A customer wants to know that whether they are a potential first-time buyer or an existing customer reporting a problem, that they will always be treated the same way. This consistency gives peace of mind and this in turn can lead to an increase in future sales.

Major defects can have serious implications, particularly when it comes to vehicles, and so it’s extremely important that the entire situation is managed in the correct way. As the facts of this particular saga unfold, it will soon become clear if Ford SA were well advised on the matter or not.

Any manufacturer, retailer of products or provider of services in South Africa should have a reputational risk management plan in place, because even when the disaster is not directly one’s own, it can still have a catastrophic impact on future sales and one’s own brand.

If your company’s reputation means everything to you and your stakeholders, and you don’t have a formal reputational risk management plan in place or you would like a different point of view, then contact Jan Drahota, Executive Director at Indwe Specialist Risks, on 0860 13 13 14.

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