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Are You Auditing Risks That Matter – Auditing Risk Before Your Reputation is Ruined

No matter how good your product or service, an organization’s reputation can be ruined with the click of a keyboard. Auditors talk a lot about risk, but I wonder how many of us are actively reviewing items impacting our company’s reputation. 

Your Reputation Can Be Ruined with the Click of a Keyboard

Several years ago, I wrote an article about third party providers. I discussed an incident where I was delayed in Atlanta’s Hartsfield airport. The delay required an overnight stay and Delta Airlines made and paid for hotel accommodations. I was impressed and pleased as a customer that there was a process for this. It was effective, but I was not so impressed by the efficiency. Here’s the back story.

Here’s What Happened

My flight had been delayed multiple times and by approximately 6 hours. After learning the flight had been cancelled, we then had to walk quite a distance to an obscure part of the airport to customer support. The customer service agents then requested various information from us (flight number, name, destination, etc), verified us, searched nearby hotels for availability and matched us to a hotel. It took about 20 minutes per person to get this done. This process could have been more efficient, but was not too bad.

After getting a hotel voucher, we then had to walk to the hotel transportation/shuttle area. After another hour and a half, we determined that our shuttle was a no show. It was well after midnight and we were tired.

Another hotel’s van driver was kind enough to take us to our hotel. This was an epic failure. But it was not Delta’s fault. However, most customers may see Delta as the culprit. It may not be the airport’s fault either. I’m fairly certain they do not “own” the shuttle service. It is most likely outsourced to a third party. While on one hand I say it is not their fault, this is only partially true.

Each company outsourced part of their operation to another party. That party adds additional risk. So in that article, I asked my fellow auditors, are you auditing third party providers. How do you know their services accurately and adequately reflect the company’s mission, vision and values?

Fight for a Flight

Fast forward a few years later, last night I had a similar experience. My fight was delayed several times and then finally cancelled. It was after midnight. I was having flashbacks of the previous flight experience. But something seemed different this time. 

First, after delivering the bad news about the flight cancellation, the gate agent instructed us to see him for our hotel assignment. No long walk through this massive airport and no waiting in a long line facing interrogation just to get a hotel assignment. We simply scanned our ticket and the system printed the hotel voucher and placed us on a flight first thing the next morning. How awesome is that. Score one for Delta.

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Then, I remembered the previous hotel shuttle experience. Fortunately, this shuttle showed up after about 15 minutes. It was overcrowded and could not accommodate everyone. The quick-thinking driver asked another hotel’s driver to transport the remaining passengers. So none felt left behind. 

The hotel check-in was smooth. I provided front desk personnel with my voucher and identification and boom, I had a room. Other than some random person trying to get in my room late at night, the hotel stay was uneventful. The next morning, I took an early shuttle back to the airport. Once back at the gate, Delta had breakfast waiting for us. What a win for Delta. And my belly…lol.

This makes me wonder if the auditors at Delta have ever looked at the flight cancellation experience? Or have they checked the third-party providers involved in any aspect of the customer experience? In this instance, a decent process has become a very good process overtime. I believe that this is the sweet spot for internal auditors.

Your Reputation is at Risk

There is no right or wrong / step by step process to finding this sweet spot. But I believe one way to get there is to audit exception processes in the organization. For example, if a plane gets canceled, examine how you ensure you don’t compromise controls yet still deliver a decent customer experience. In the retail industry, examine how you handle exchanges and returns, etc.

What happened with Starbucks in April of 2018 gives us a good example of these types of risk. The store manager in a Philadelphia location called the police on some young men who were allegedly loitering in the store. The men, on the other hand, claimed that they were trying to have a meeting in the store. However, they did not purchase anything. Starbucks has a policy in which people are required to purchase something from the store in order to use its facilities. When asked, the young man refused to leave. As a result, the store manager called the police.

What happened next, was a real lesson in reputation risk. The young men accused the store manager of racism. The story was news headlines for a very long time. Starbucks actually changed their policy. Now, no purchase is necessary to occupy space in a Starbucks store or to use the restroom. They also closed down many stores across the country for an entire day to conduct sensitivity training.

I don’t know what happened to the store manager, but some wanted her terminated. Now imagine all of this fall out because someone actually followed company policy.

With the reversal of that policy comes other risk. How many of us have chosen where we were going to eat based on the size of the crowd at the location? We drive by, see that it’s crowded, and decide to eat somewhere else. And what if it’s packed to capacity with non-paying customers. You now essentially lose money.

Hindsight May Not Be Right

Of course, it’s easy to come in on the back end and critique the situation. The organization made the best decision it could at the time given the information that it had. But the question still remains for us auditors, are we auditing things that can indirectly or directly affect our organization’s reputation? Are we thinking about the reputation implication when we’re auditing?

I’d love to hear from you. How do you identify reputation items during audit engagements?


Are you looking for good online internal audit training? You’re in luck. I have two resources for you. 

  • CRisk Academy offers world class online training. You might even see some courses from yours truly. If you visit Crisk, tell them we sent you. 
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If you need personalized training for your staff, good audit cosourcing/outsourcing partner, or a quality QAR, shoot me a message.

REFERENCES

https://www.inquirer.com/news/starbucks-incident-philadelphia-racial-bias-one-year-anniversary-stutter-dilworth-park-homeless-tables-20190412.html

Robert Berry (96)

Robert (That Audit Guy) Berry is a risk, compliance and auditing advocate, educator and innovator. He helps good professionals become better by creating articles, web services and training that allow them to expand their knowledge network.

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