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    Topic review

    Reputational Risk and Sustainability

    Subjects: Business
    View times: 10
    Submitted by: Haitham Nobanee

    Definition

    Reputation is the contemporary business’s most important commodity. Well, the known will lead to several promising results. Businesses with a solid, good reputation retain consumers and create market satisfaction, hire and sustain high-level staff, build long-term relationships with vendors, attract new buyers, obtain funding at reduced prices and deter future rivals from joining the industry. Since the investor expects that these businesses will achieve long-term profit and future prosperity, they have higher costs and market values. 

    1. Overview

    The research was conducted using the Scopus database, which returned 88 publications published during 2001–2020, revealing that the amount of research output within this field is limited, and more research output should be conducted in the field of reputational risk and sustainability. We identified nine research streams: reputation risk, reputation risk and sustainability, supply chain management, social responsibility, reputation risk management, strategic approach, sustainable development, corporate sustainability and risk assessment. This bibliometric analysis provides managerial and policy implications for sustainability consideration of reputational risk with perceptions to advance knowledge in this important research field. 

    2. Validity Hypothesis

    This decade saw a rise in corporate sustainability reporting (Frost et al. 2005), which represents a trend in social and environmental accounting. Sustainability reporting deals not only with the present generation but also with future generations in regards to fiscal, environmental, and social success. Academic literature has established theories that aim to provide an explanatory context for increased accountancy in the social and environmental field, with the latest major development probably being the RRM thesis (Bebbington et al. 2008a).
    The validity hypothesis (Parker 2005), perhaps the most prominent of theories, interprets environmental and social accounting as an improvement in traditional accounting and reporting in comparison to more radical theories. The critical legitimacy theory, however, has a lack of precision as Parker (Parker 2005) points out, that the RRM theory has a “greater clarity structure” of reporting purposes as contrasted with the theory of legitimacy in the case of corporate social responsibility (CSR). The study of the RRM proposes that CSR reporting should not only be interpreted as a reputational connection but as part of a corporate-led RRM (Bebbington et al. 2008a). The thesis will allow one to understand the operationalization of the relationship between sustainability and RRM in a business environment.
    A mixed analysis of the work of Babington (Bebbington et al. 2008a; Unerman 2000) attacked Adams for not distinguishing himself from the philosophy of legitimacy. The subtle difference is whether or not authority exists, whereas credibility is comparatively significant (Bebbington et al. 2008a). The real point of dispute, though, tends to be that legitimacy can be perceived as relative and has been used for reputation in social and environmental accounting. Babington (Unerman 2000) states that this has happened only rarely in social accounts, although Adams (Adams and Larrinaga-González 2007) insists that “the connections of credibility with news have been extensively examined”. In either case, the researcher suggests that the RRM study will lead to the need, and interpretation “of what happens in organizations, of the dynamics and interdependence of organizational systems, beyond the current theory of lawfulness” itself.
    Hopwood (Hopwood 2009) notes that businesses are engaged in using environmental monitoring to “facilitate the creation of a modern and varied business brand”, rather than merely to enhance their credibility. It offers a set of examples that demonstrate that environmental reporting in the industry seems more to concentrate on actual actions and performance than policy (Hopwood 2009). ACCA’s results from Australia and New Zealand (2007) also indicate a commitment to presence rather than action following sustainability studies. It emerges from this that credibility cannot be enough to explain how sustainability reports tend to be more driven by brand and prestige issues than by transparency.

    3. Reputation

    Reputation is the contemporary business’s most important commodity. Well, the known will lead to several promising results. Businesses with a solid, good reputation retain consumers and create market satisfaction, hire and sustain high-level staff, build long-term relationships with vendors, attract new buyers, obtain funding at reduced prices and deter future rivals from joining the industry. Since the investor expects that these businesses will achieve long-term profit and future prosperity, they have higher costs and market values. The respectable valuation varies between 20% and 90% of the overall market value of the company (de Castro et al. 2004). In their report, Wang and Smith (Wang and Smith 2008) contrasted a sample of the sizes of control companies (de Castro et al. 2004) with high prestige (from the list of American’s Most Admired companies). They noticed that the company’s prestige grows by about $1.3 trillion above the average and suggested that the market-value increase is attributed to the high-profile companies’ growth in financial results and lower leverage (lower financial risk). Powerful, optimistic credibility undeniably offers the company certain observable advantages. However, reputation is a double-edged sword: on the one hand, a good reputation brings benefits to all stakeholders and, on the other hand, it places the business at risk of reputation (Eccles et al. 2007). The higher the credibility, the greater the likelihood that its harm would arise. It follows that the demands and aspirations for a highly regarded business are greater than for the one with little opinion. Therefore, any fault or slip is much more and painfully felt in terms of the former. The errors of a reputation-poor subject are best taken or should also be taken. We claim then that such an organization would have been expected. According to the principle “the bigger you get, the higher you fall” (Honey 2009), the businesses with exceedingly high prestige are, thus, burdened with greater risk of liability. If all of the stakeholder groups’ expectations are not met, so the company’s confidence will diminish and credibility will deteriorate. There would tend to be a crisis scenario that has unwanted economic consequences as well as psychological or social effects (Valackienė and Virbickaitė 2011). In light of this, reputation risk detecting and minimizing risk is a priority problem in the control of this risk.
    Reputations affect various social circumstances, particularly those where actors make or are obliged to decide (Bromley 2000). These judgments may refer to the appreciation or values assigned to a particular object or person or group of social actors, the trustworthiness and efficiency of local hospitals or investment opportunities, worker performance, the successful care of the individual, the consistency of the teaching in schools or consumer goods brands or whether a meeting or location met their standards. Thus, human judgments and behavior appear to be precipitated by “reputational awareness” and experiences (Bromley 2000).
    Once formed, it represents the status or respect of a certain object, individual, social category, commodity, organization, town, and the like (Bromley 2000). The prestige represents a collection of assumptions, principles, and beliefs. Renowned mechanisms are primarily discursive and focused on the sharing of images, perceptions, rumors, listening, and explanations of experience between social actors. The creation and distribution of reputations in social networks and throughout the organizational and social sphere are primarily driven by micro-processes (O’Callaghan 2007). For instance, a big organization with competing and contrast views on a certain reputational object may appear in one field or, if appropriate, several fields. Over time, these perceptions either settle and become accepted and then are constantly repeated or decline over time until they are completely lost or revived by changes in events or situations. For starters, the Bristol tragedy was marked by two opposing sets of convictions regarding the credibility of medical practitioners (Kewell 2006). There are several convictions that child cardiac pediatric procedure is favorable and state that Bristol’s pediatric surgical team’s success is consistent with usual expectations of a “center of excellence”. However, an alternative approach appeared after new physicians and surgeons from other excellence centers in England and abroad, roughly 1988–1994, were admitted to the hospital. These recent entrant experts acknowledged that the success standards of other centers of expertise in the discipline are dangerously short of the fields encountered. These “recruits” to the Bridge Frontier Institute have, importantly, been able to see all the threats that their time-served counterparts cannot see (Weick 1995). This case, thus, highlights the common disparity in social players’ views of prestige, popularity, and esteem. It also highlights the risks of prestige.
    Reputations reflect intangible properties especially for large organizations that invest heavily in print management and marketing, but also for people who perform their roles in daily life, such as medical professionals (Bromley 1993). The reputational information—an environment in which reputation and its influence are understood—is fundamental to the “sensory” systems of humans (Weick 1995), and probably forms much of our meetings in the social environment (Bromley 1993).
    As a social institute or process by which habits are controlled and by which self-monitoring is used (Granovetter 1985). This especially applies to economic behavior that includes trust-enhancing models of trade and reciprocity in itself (Sasaki 2019).
    Reputation serves as a foundation for relations of trust and trade and reciprocity between social players, thus, legitimizing intervention. Faith itself creates generally agreed standards of behavior and helps regulate against open usage by the related stakeholders of activities that are believed to be deviant, disloyal, malfeasant, or immoral (Granovetter 1985).
    Reputation also leads to the ethical management of human behavior, by establishing, among other forces, trust and by generating the kinds of reputations that people either strive to or care about—exalted, neutral, indifferent, poor, and dubious (Bebbington et al. 2008a). Here, credibility functions as both a type of authority and a social lever that institutionalizes the understanding and imagery of a reputational entity. In the Bristol Royal Infirmary (BRI) situation, both young and existing medical professionals exploited inconsistent views of credibility to further their agenda. The rhetorical fights between these two also had reputed experiences and photographs (Kewell 2006).
    The power dimension is recognized in sociology, particularly in the work of Bourdieu, where it is regarded as a source of capital that helps social actors to obtain economic, social, and symbolic influence in social, cultural, policy, and economic development and regulation (Granovetter 1985). This is the most important feature of society.
    Reputation is the signaling impact of a reputation’s ongoing presence among the social processes which lead to the establishment of cultural values, laws, and procedures, as (Granovetter 1985) points out. It also involves institutions and behavior regulates, power relations, and individual mental archetypes. As a result, reputational information is latent in human behavior, and we, thus, behave as second nature. Most notably, it is implicit in the “mental models” and scripts used by social actors to formulate and work through behavior in daily life (Kewell 2007).
    It is arguably reputation that is key to creating social risk, as well as the social development of other human relations trends such as economic trade. ‘risk construction as an Act consists of the assembling into mental templates or interpretive schemes of thoughts, assumptions, sensations, pictures, images, impressions, and perception of threats, hazards, customs, and laws that help to decide reasonable and likely irrational modes of behavior, both necessary and associated risks’ (McDonald et al. 2005). As a consequence, risk-building is an interconnected mechanism that involves confidence and credibility, developing mainly through an exchange of discourse on the threats, risks, and probabilities among social players. In the case of BRI, for example, “talk” was mostly about credibility. Histories and gossip were shared to help promote conflictive credibility and, thus, combat the disaster among medical experts (Teasdale 2002). The repeated dissemination and sharing of narratives, hearsay, and evidence, and misconceptions added to the integration and institutionalization of the influence of the crisis on legitimacy.
    Therefore, a sense of risk must always be in place in some manner if it is to be socially developed. What social players are there to understand and believe about a person, entity, institution, place, or event who anticipates their view of an object and its risks and opportunities? Remembrance can help decide if this idea becomes dreaded, abhorrent, tempting, secure, or harmful (Kewell 2006). Then, this thought sets the stage for action and, depending on the situation, even inaction.
    However, Eccles et al. (2007) state that most businesses handle their reputable risks inadequately. It appears to concentrate its efforts on overcoming the risks already posed to its reputation. The management of crisis a preventive strategy intended to minimize damages is not risk management. Companies do not typically notice or appreciate their reputation until they are harmed or destroyed. Then, they are trying to save and reconstruct it. However, this job turned out to be much simpler than the reputation to be built and sustained. This is illustrated by the study findings carried out between North American, European, and Asian business leaders. To the question: What is the most complicated process in reputation management? Development, restoration, or rehabilitation of reputation? A strong majority (66 percent) of respondents reported restoring their credibility, preserving their reputation 24 percent, and building 10 percent only.
    The dramatics of reputational damages noted in recent years have led to the substantial rise in prestige and related risk, with the examples that follow: Enron, Arthur Anderson, World Com., Adelphia, and Tyco. Reputation risk is viewed by management and analysts as the greatest danger to the contemporary business research findings among senior risk managers, who have already been quoted, prove the greatest danger for the enterprise performing on the global market among 13 of the selected risk types. The next positions are regulatory danger, human resources risk, IT network risk, risk to the market, loan risk, nation risk, risk finance, terrorism, foreign exchange risk, natural danger hazard risk, political risk, and crime.
    The credibility of the organization is multi-faceted and dynamic. Specialists from several fields, including accounting, economics, sociology, psychology, and marketing, make diverse concepts of science and study (Teasdale 2002). The following two should be cited: “a perceptual reflection of the past operations of the organization and the potential viewpoints that will explain the general appeal that the company is making to all its main components/interests as opposed to the other competitor representatives”. From these concepts come a variety of essential reputational qualities.
    Some bibliometric studies on risk assessments and management have been conducted in different study fields. Amin et al. (2019) used the bibliometric methodology to analyze research output on process safety and risk analysis, Fu et al. (2021) analyzed Arctic shipping risk management using bibliometric analysis, Nobanee et al. (2021) used a bibliometric method to analyze research output on sustainability and risk management, and Díez-Herrero and Garrote (2020) analyzed flood risk analysis and assessment research output using bibliometric analysis. Braun et al. (2019) conducted systematic and bibliometric methods to analyze the literature on sustainable remediation through the risk management perspective and stakeholder involvement, Xu et al. (2020) analyzed the existing literature on disruption risks in supply chain management using bibliometric analysis methodology, Ganbat et al. (2018) employed the bibliometric method to review the literature on risk management and building information modeling for international construction, and Han et al. (2020) used a bibliometric overview of research trends on heavy metal health risks. Fuentes Cabrera et al. (2019) applied the bibliometric review methodology to analyze the literature on bullying among teens, ethnicity, and race risk factors for victimization. Darabseh and Martins (2020) used a bibliometric study and content analysis on risks and opportunities for reforming construction with blockchain, and Da Silva et al. (2020) conducted a bibliometric method to review research output on data mining and operations research techniques in supply chain risk management; to the best of our knowledge, we did not find any study that employed the bibliometric method to review existing research output on reputational risk and sustainability. By using 88 documents obtained from the Scopus database and analyzed using the VOSviewer, this research addresses several questions related to reputational risk and sustainability: (i) What is the current publication trend of reputational risk and sustainability research? (ii) What are the most influential documents, countries, authors, and journals of reputational risk and sustainability research? (iii) Which topics themes and streams involving reputational risk and sustainability research are the most recent or common among scholars? (iv) What are the directions for future research in the field of reputational risk and sustainability

    The entry is from 10.3390/risks9070134

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