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Reputational risk to be put before profit: survey

Reputational risk to be put before profit: survey

Sunday, August 25, 2013, 16:00 GMT+7

Some 76 percent of global financial leaders said their companies were prepared to sacrifice short-term profits for protecting long-term reputation, according to a global survey of 1,300 finance leaders operating in 61 countries conducted in July.

It also revealed that the same number agreed that they are currently focusing more on reputational risk than in previous years, according to the survey conducted by the Chartered Global Management Accountant (CGMA) designation, which is a joint-venture of CIMA and AICPA.

About and 44 percent revealed that they had rejected projects that made financial sense because their reputational risk was too great.

The demand for more transparency, competitor reputational failures and the rise in social media channels such as Facebook, Twitter and LinkedIn were found as key contributing factors to the increased global interest on the issue.

“Nearly a quarter of businesses surveyed admitted to experiencing reputational failure in the past and the widespread use of the internet and social media casts a harsher spotlight than before”, said Tanya Barman, Head of Ethics at CIMA.

However, 95 percent of the organizations surveyed admitted to not always using feedback from social media channels to help them anticipate and manage risk to their reputation.

Not only that, 62 percent of those had no formal processes or models in place for calculating the financial impact of not managing reputational risk.

“Businesses still appear to be struggling with how they go about managing non-financial reporting in this area.”

“In order to be fully protected, it is vital for finance directors and leaders to start moving away from focusing primarily on the short term and to begin collecting, reporting and monitoring reputational risk information”, Tanya Barman shared.

Two of the world’s most prestigious accounting bodies, the American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA), have formed a joint-venture to establish the Chartered Global Management Accountant (CGMA) designation.

CGMA now owns business experts making up the world’s largest community of management accountants and guides business decisions across the globe, including 95 of the world’s top 100 brands and 91 of the Fortune 100.

They hold senior positions, including CEO, CFO, and Finance Director, and have a broad perspective on the long-term prospects of their organizations, their markets and their regions.

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