Risk 101: It's All About People

In 1913, James Cash Penney, the Founder of JC Penney, raises this point best within The Penney Idea which states, "To improve constantly the human factor in our business."  This philosophy has helped JCPenney prosper over a century.  More recently, Warren Buffett,has been quoted saying "We can afford to lose money - even a lot of money.  But we can't afford to lose reputation - even a shred of reputation."  Whether you love or loath Mr. Buffett, his philosophy has withstood the test of time and proven successful for Berkshire Hathaway.  In fact, all business problems, particularly reputational ones, share a common denominator - people.  Assuming the human factors always work or you can always trust people is probably the most significant and overlooked risk by Boards and Management.  Trust is not a control and you can't control behavior, but you can govern it - by accepting or rejecting an individual or groups conduct and methods of dealing.  After all, your reputation might just be at stake.  This is why I often recommend routinely engaging all employees to solicit feedback, ethics complaints, and suggestions to gain visibility into culture to help discover where reputational risk might be hiding or starting to fester.