Risk Management

NRA Boycotts Demand Risk Assessment

Either boycotting or not boycotting the National Rifle Association could alienate segments of customers, so decide carefully.
Steven MinskyMarch 1, 2018
NRA Boycotts Demand Risk Assessment

Last weekend, companies started responding to consumer backlash for working with the National Rifle Association. Among those ending discount programs for the NRA are Delta, Hertz, MetLife, and First National Bank of Omaha.

Steven Minsky

Steven Minsky

Before this pushback, NRA membership granted consumers access to a broad range of discounts, from special rates on auto insurance policies to cheaper flights when booking through the NRA’s website.

But after the mass school shooting at a Parkland, Florida high school on Feb. 14, Americans flooded social media with a call to action: #BoycottNRA.

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The Marjory Stoneham Douglas High School tragedy and the resultant consumer backlash have presented many companies with a decision on whether to cut ties with the NRA.

This decision is unique, as it is entangled with complex emotions and opinions. Like all decisions, however, a company’s choice will affect its customers, investors, and other stakeholders. Companies that find themselves in this difficult position may benefit from introducing risk management into their decision-making process.

Risk Assessing Affiliate Partnerships

Developing or severing relationships between organizations carries risk. An affiliate partnership is a relationship just like other vendor or sponsor relationships in that the actions of these third parties can affect a company’s reputation and success. This impact can be assessed from a risk management perspective.

Companies should consider doing a risk assessment on the impact of choosing to cut ties with the NRA, or not. This approach will integrate clear, objective insight into the decision-making process. Every company is different, so it’s important to measure and address the risk-reward tradeoffs the decision carries for a specific company.

For example, First National Bank of Omaha is one of America’s 15 largest credit card issuers. Its partnership with the NRA provided members NRA-Branded Visa cards with 5% cash back on purchases.

NRA members are consumers that the bank can attract by offering discounts. However, other consumers feel strongly that there should be increased gun control. Both segments threaten to take their business elsewhere. So, what decision should be made?

On Thursday afternoon the bank tweeted, “Customer feedback has caused us to review our relationship with the NRA” and said it would not be renewing its contract to produce NRA-branded Visa cards. A risk-reward analysis helped the bank realize that maintaining a relationship with the NRA would have a large enough impact on their reputation to justify cutting ties.

In addition to weighing the impact this decision could have on customers and investors, there is a litany of other factors companies should take into account. Take Delta, for example. Shortly after making the decision to cut ties with the NRA, headlines such as these surfaced: “Delta’s decision to cut ties with the NRA could cost it a generous tax break from the state of Georgia.

Did Delta consider the possibility of these ramifications? Did it think to consult its political stakeholders? Had it identified and assessed every possible risk of discontinuing their partnership with the NRA, it would have been more equipped to respond to these kinds of headlines. So far, however, the airline’s public relations efforts have missed the mark, and the issue has now spiraled into discussions around corporate tax breaks, Georgia’s economy, and politics.

The nature of this decision is both emotionally and strategically complex. Risk management can help companies clarify risk-reward tradeoffs as they work through this fragile issue.

Reputational Risk in a See-Through Economy

Why is #boycottNRA having such a powerful effect?

In previous writings, I’ve defined the see-through economy: a dizzyingly fast-paced age of transparency where consumers are empowered by social media to impact a company’s reputation. In the past six years, this trend has only become more pervasive.

Companies can’t survive without the support of their customers and investors, both of which have been given an amplified method of voicing what they demand and expect from the companies they choose to do business with.

Because consumers and investors now have a voice that is as amplified as one large company’s voice, public relations is losing some of its control over the message a corporation puts out. The consequence is that companies become less effective at managing reputational risk after the fact; they must take a proactive approach to ensuring reputational risk does not materialize in the first place.

For example, over the past few months a handful of companies have cut ties with the NRA after evaluating a shift in consumer opinion and have therefore avoided entangling themselves in this sensitive issue. Delta did not practice this foresight and is struggling to come out from under the cacophony of opinions on this subject.

The see-through economy is also fundamentally changing the way we think about the relationship between corporate behavior and investing. Environmental, social, and governance (ESG) investing is a term that’s often synonymous with the growing consideration of a company’s impact, partners, and vendors alongside financial factors when deciding whether to invest in an organization.

This dramatic and recent change is evidenced by the fact that nearly one out of every five dollars under professional management in the United States is involved in some form of ESG investing.

To stay ahead of the inherent risks of these changes, I believe companies will need to integrate risk management into the decisions they make at all levels of the business and across all departments.

Steven Minsky is CEO of LogicManager, a risk-management software firm, and co-author of the RIMS Risk Maturity Model. Follow him on Twitter at @SteveMinsky.

This article was originally published on logicmanager.com. Reprinted here with permission.

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