Protecting Your Licence to Operate in the Future

22/10/2013 12:39 BST | Updated 21/12/2013 10:12 GMT

Normally, when people talk about reputation management they immediately think of crisis communications and the importance of protecting a company's brand when something goes wrong. While this is a crucial part of any reputation management programme, many companies are overlooking the benefits of proactive corporate affairs initiatives which look to understand and mitigate future threats to their licence to operate.

RDR - a case study

In January this year, new rules from the Financial Services Authority came into effect. These regulations, known as the Retail Distribution Review (RDR) changed the way financial advisory companies have to operate.

Despite RDR being announced in June 2006 and companies having a great deal of time to get 'RDR-ready' advisor numbers fell from 40,000 at the end of 2011 to 31,000 by the start of 2013. Many of these were smaller firms who didn't have the infrastructure to become RDR compliant. It is thought that the number of firms going out of business will increase as there is more competition for HNW customers and fewer potential clients willing to pay for advice. Clearly, while protecting consumers, RDR left many businesses unable to operate.

The lesson here is that if an industry is going to face much tighter regulation, businesses need to either ensure that the regulation will not threaten their licence to operate, or adapt.

The problem is not that financial advisers did not try to stem the flow of regulation but instead that they left it too late to ensure that their businesses were protected against disruption.

Next up - fatty foods and alcohol?

Two industries likely to suffer from the rising tide of public health regulation are the fast food industry and the booze industry. Already, alcohol companies are feeling the pinch as taxes rise year on year and more laws are introduced about how and when alcohol can be marketed or sold.

Fatty foods are another example. As the war on obesity rages on, it seems clear that more regulation will be introduced to shape how fast food, for instance, is sold.

The question is, 'are alcohol and fast food companies aware that this is coming and doing everything they can to protect themselves, or will they leave it too late?'

Every industry is at risk

With alcohol and fast food, two industries which have noticeable impacts on public health, people are often inclined to say either 'serves them right' or, more worryingly, 'this won't impact my company, my products / services have no health impact'. It is important to realise that every industry and every company has threats to its licence to operate, particularly as the advance of digital has changed the mechanism for society to express its concerns, and thus increased the rate of change. Food companies are facing greater scrutiny on supply chains, the banking industry can look forward to ring-fencing and even 'healthy' smoothies and drinks face criticism about how they describe their products and how much sugar they contain.

If businesses don't have a reputation management programme that evaluates and mitigates these threats, they run the risk of finding themselves in a position where it is too late, and the company is no longer able to operate.

What should businesses do, to ensure competitive advantage?

  1. Understand the threats

In order to act, businesses need the right information. Do you know and understand every piece of regulation coming down the track which could impact your company? Do you know which hot topics NGOs are currently lobbying on? Have you done a media analysis to see if there are any press campaigns that could influence regulation? Do you know what consumers are supporting through social media? To implement an effective reputation management plan, the answer to all these questions should be yes.

  1. Understand the impact

Once you understand the landscape, you need to work out what the impacts on your business might be. What things might have a positive impact, what will be a nuisance, and what might stop your company being able to function? You need to evaluate the risks carefully and prioritise them in order of importance. Based on this evaluation, create a stakeholder engagement plan where relationships are prioritised, in terms of level of engagement, based on the risks' potential impact on the business.

  1. Understand what you can act on

Next, understand what your influence is and what threats you have the power to mitigate, or what opportunities you have the power to exploit. Depending on the risks, there will be different actions you can take. If there is regulation coming, you may need a public affairs programme that can help you state your case for how that regulation should work. If there is social media unrest, you may need public relations / social media strategy to help to rebuild your brand. If there are NGOs lobbying an issue, you may want to reach out to them to allay any concerns. Often, when it is an industry-wide issue you may want to partner up with other likeminded companies to work together. Mostly likely, you will need a corporate affairs strategy that includes elements of all of these.

Whatever threatens your business's licence to operate, it is crucial that you do act. You need to understand the issues as well as their impacts and ensure that your company has an effective reputation management plan that will keep your company successful in years to come. Businesses that have a proactive corporate affairs strategy will be able to stay ahead of regulation and address public concerns, influencing the landscape and protecting licence to operate. This can lead to competitive advantage as a business will withstand disruption, where less prepared competitors cannot.