G4S Company Managing Reputation Risk

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G4S Company Managing Reputation Risk

Reputation risk can be managed. However, reputation risk is the most difficult type of risk to manage. The image of an organisation is difficult to quantify and validate. However, every institution has its own image. Image comprise of how the firm is regarded by its internal and external publics. The image also depends on the corporate identity of the company. Although there is no parameter to measure the quantity and quality of reputation that a company bears, a positive image enhances the performance of an organisation. An organisation can only have a positive or a negative image and not both. Zolkos (2013, p.23) asserts that the public relations team of an organisation can predict the predisposing factors that can spoil the reputation of an organisation through research and forecasting. Scott and Walsham (2005, p.322) observe that sending difficult information enhances misunderstanding hence giving room for rumours and exaggeration. Sampath (2009, p.305) asserts that reactions towards reputation management should be proactive rather than reactive. It is easier to dissociate a company with a bad image than to med its image when it is already soiled. Reputation risk can also be managed through research and analysis (Sasaki 2010). A company should be able to predict various factors that are likely to soil its reputation. For example, G4S can predict that the employment of corrupt employees is likely to soil its image. Cases of robbery can also soil the reputation of a security firm. It is also reputation-damaging for a security officer to steal from the client. All these cases can be prevented through vetting and continuous auditing. Hackett (2013, p.34) affirms that G4S should put very strict disciplinary measures for its officers that are caught in misbehaviour. The company can also involve itself in corporate social responsibility. Such activities will enable the company to develop a positive image in the community and the public. Zolkos (2013, p.23) asserts that social responsibilities like cleaning of towns, education of orphans and poor children, the building of social facilities, and planting of trees will build a positive reputation for the company. The image comprises many facets of the organisation. Every other public of a particular organisation can make or destroy its image. Reputation risk is therefore manageable by training the public on how to treat the clients and potential clients. Watson (2003, p. 21) recommends that a security firm like G4S should be associated with accountability, trust, accuracy, transparency, and honesty. All these qualities should be cultivated in all its publics.

The reputation risk of G4S has tended towards the negative side for the last two years. The company has been featured prominently in the negative limelight after having failed to acquire ISS Ltd, a facility management group, in 2011 (G4S plc Annual Report 2012). Rosen and Riippa (2005, p.23) contend that having come out of a failed acquisition attempt with tens of million-dollar loss, the G4S has declined in popularity. Begelfer (2012, p.29) affirms that poor media relations further tainted the reputation of G4S since the company had publicly announced the deal. Most of the shareholders opposed the $5.2 billion deal, and hence it flopped within a span of two weeks. To many investors and potential investors, the company had not carried out proper research and estimates. Such trial and error in the management of finance can rarely be trusted. Investors would want to put their money in a company that has a firm foundation and/or one that rarely makes losses. According to Rosen and Riippa (2005, p.23), the G4S Company came out of the ISS acquisition attempt with tens of million-dollar losses. This further tainted the reputation of the company; the company was seen as a loss making institution hence further scaring away the investors. The whole saga was pointed at poor planning and poor investor relations. Armstrong (2008, p.24) observes that a company that poorly communicates with its source of funding is bound to fail. A negative reputation will also scare away customers from doing business with G4S. Begelfer (2012, p.29) affirms that customers want to do businesses with companies that are financially stable and that seems to have a successful future. Scott and Walsham (2005, p.322) observe that withdrawal of investors and cancellation of financial deals like that of the G4S and ISS may lead to negative implications in their future. The investors interpreted the fact that the G4S Company wanted to acquire an ISS that was in a completely different line of business and area of expertise as ill-advised. The company would have suffered great debts on its balance sheet through the acquisition of ISS. The financial and business advisors of G4S had misled the company in making investment interests. Investors are therefore likely to be scared from investing in a company that is poorly advised and/or one that may make wrong investments hence making them lose their money. In fact, Kemp (2004, p.257) affirms that the resignation of Alf Duch-Pedersen after the failure of this acquisition is an indicator that the company suffered injuries. Investors and shareholders may therefore use this case as a basis for them to withdraw their fortunes from the company. Gary (2013, p.17) adds that the disastrous Olympic contract also resulted in soiling of the G4S reputation more. The company has therefore ended up losing contracts worth millions of dollars.

Zalud (2012, p.20) asserts that allegations of fraud in contracts issued by the United Kingdom government have also resulted in more damage to the companys reputation. No investor would want to put his money in a company that practice fraud since it can easily be deregistered or heavily fined by the government. Sampath (2009, p.305) asserts that a company that deals with security and handling of cash like the G4S should portray the utmost honesty and transparency.

According to Kemp (2004, p.257), the implication of reputation damage at G4S has been a loss of business, trust and finances. The financial performance of the G4S has been on the decline in the last 20 months. This has made the company lose business to smaller and upcoming security firms. According to Dunning (2013, p.32), investors have also feared investing in a company that is thought to be on its decline trend. Loss of government and private sector contracts has also affected the company negatively. The financial standing of the company has also declined. Investors are the source of company revenue. As various investors withdraw their resources from the G4s, the company has continually suffered from a low financial base. Eccles, Newquist, and Schatz (2007, p.104) are for the idea that the fact that G4S Company failed to provide enough trained security guards to the London Olympics in 2012 made the company soil its reputation. Failure to provide security and having failed the country further made the company make losses. For example, in 2012, following the failure of G4S to provide security, the company suffered a decline of its shareholders by 9 per cent. According to Dunning (2013, p.32), the reputation of G4S as the most accomplished multinational security firm was further tainted when the labour Member of Parliament in London, Mr Keith Vaz, declared that G4S had failed the country. Not every other country would want to invest or trust G4S Company to manage its events. The Olympic Games come after several years. Hackett (2013, p.34) affirms that it was logical that G4S could have trained adequate security officers for the event long before the beginning of the London Olympics games in 2012. It is also worth noting that G4S security officers that operated in Newcastle in 2012 were all substituted with other local security personnel. About 500 security officers from G4S were replaced. A move like this may not go well with investors and potential investors. Redmond (2003, p.86) emphasises that replacement of G4S security officers by local officers meant the loss of business hence revenue. Furthermore, G4S was denied a security role in Scotland in the same year. Dempsey (2004, p.32) argues that the 2012 Olympics games may strip off G4S many business contracts that were on the offing. Eccles, Newquist, and Schatz (2007, p.104) argue that no investor or client would imagine hiring security guards without a means of communication. Communication is imperative in security matters. In the future, investors and potential customers may not outsource security services from G4S due to fear. Such moves have already taken roots in Bedfordshire and Cambridgeshire, where the government and private contractors have been advised not to outsource security services from the G4S. The complainants have cited the total failure of the G4S security services in the Olympics. According to Díaz (2012, p.49), G4S Company must therefore design ways and means of ensuring that it has adequately trained officers. Its officers must also be committed to their duties in order to salvage the current reputation crisis. Watson (2003, p. 21) claims that the failure of G4S officers to report to their duties like they did to one of the contractors in London in 2012, where a third of the security guards failed to report for night duties, will only make the companys image more soiled. The company will be labelled negatively for not honouring its work promises. No client would want to work with a company that breaches its contracts. This is especially worse in matters of security. Who would imagine looking for police officers to guard his or her investments at night after the G4S security officers fail to report for their night duties?

References

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