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30 April 2015

Litigations and Reputational Risk. Measuring the impact of Legal Proceedings on the Reputation of companies

The economic, social and political contexts of recent years, particularly in those countries most affected by the crisis, have changed the relationship between companies and citizens. There has been a shift from what could be described as a “necessary coexistence” between audiences and corporations to a “permanent scrutiny” on the performance of companies at all levels.

In this sense, legal proceedings affecting a company might entail a severe blow to the trust of all the stakeholders. The risk of losing corporate reputation when facing a legal proceeding has become increasingly clear, regardless of its scope and type. This fact has led us to analyze how the impact that the litigation will have on the reputation of a company can be measured and how should the latter manage its communication strategy to tackle this kind of situations.

One reason for which legal proceedings affect the reputation of a firm, apart from the process itself, is the known as “parallel trial”. The society and stakeholders of a company generate a range of opinions regarding the corporation and the proceeding in question and share them with their environment. To this must be added the important role that Internet and social networks play in this context. These tools enable anyone to make value judgements on topics which interest them, accelerating its diffusion and broadening its scope. In this sense, even more attention should be paid to the cases that might generate a broader coverage, i.e., cases which fall within the scope of Criminal Law.

Thanks to our experience we believe that, beyond the legal strategy that needs to be implemented in these proceedings, it is important to establish and plan a communication strategy which gives the company the chance to measure the impact that the litigation will have on its reputation.

Luis Miguel Peña, senior director of Communication and Litigations of LLORENTE & CUENCA.
Juan Cardona, director of the Department of Reputation and Stakeholders Management of LLORENTE & CUENCA.

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