Brand Risk: Adding Risk Literacy to Brand Management

Citation

Green, R.D. (2009), "Brand Risk: Adding Risk Literacy to Brand Management", Journal of Product & Brand Management, Vol. 18 No. 2, pp. 159-160. https://doi.org/10.1108/10610420910949086

In the last decade or two, marketing has been impacted by at least two situations that have required a greater degree of accountability. First, branding has risen to the forefront of organizations. A driver has been the financial contribution to firms from brand value. For successful businesses intangibles, of which brand equity is a significant part, are 25 percent, 50 percent, or even more of the market capitalization. Therefore, marketers have become a greater player to investors and in investor relations, rather than one primarily for the revenue stream.

Second, marketing has been required to be more answerable for its planning and plan implementation. While this may have been a result of resource allocation and budget funding considerations, marketing has taken a greater external role, such as attracting investors, rather than just satisfying consumers' needs and wants, building brand image, and sustaining customer loyalty and retention. Marketing metrics have become more commonly used internally to measure marketing activities and performances. However, these metrics are likely to have only minimal formal recognition of risk considerations. Today, marketers' “dashboard” must include risk management to support their activities and performances to build brands (value) and to attract investors (equity).

In Brand Risk, David Abrahams addresses these recent trends by an in‐depth view of branding and risks, with the challenge that marketing and risk managers have not fully collaborated. The approach to branding is not just risks of reputation but also more broadly to risk of the introduction of new products, risk of changing marketing environment, and risk of unfavorable investor perspectives. The book offers a means by which “brand literacy can help marketers to make better decisions and to make their professional case more effectively” (p. 1) – be it to internal or external stakeholders. Abrahams, with over 20 years of brand management and new product development experience for consumer goods and services companies, and now a brand risk consultant, identifies risk literacy as the third required competency – along with strategic insight and financial understanding – for marketers.

The book is very well grounded in prior research studies that range from human behavior (individual and group) to probability/statistics to risk modeling. There are numerous and easy‐to‐follow illustrative examples. However, there is a noticeable lack of case studies (past marketing examples) that would keep a reader more engaged and further support points and arguments. While most, if not all, concepts and ideas may not be new to marketers, they nevertheless are new in the context of risk literacy and risk management. The book is well organized with a progression of concepts and ideas presented and later integrated with other areas.

Broadly, risk literacy is presented by:

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  an understanding of risks and risk takers (chapters 1 to 3);

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  the “tool kits” for identifying, evaluating, and managing risks (chapters 4 to 6); and

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  implementing risk thinking and programs (chapter 7).

More specifically, chapter 1 (“The case for risk literacy”) defines and describes risk literacy and risk management in the corporate and marketing contexts. Chapter 2 (“Defining brand risk”) continues with the importance of the roles brands play in and the brand vulnerabilities from such areas as growth imperatives and mergers and acquisitions for firms. A brand risk model is introduced that includes six interacting risk components (identity, presence, equity, reputation, status, market) and a four‐part operational perspective for brand risk management. Chapter 3 (Learning to take risk) includes the behavioral aspects of risk taking, e.g. risk attitude, use of heuristics, groupthink, and their influence on assessments of exposures and opportunities.

Chapter 4 (The language of risk) identifies four risk classifications (financial, strategic, operational, hazard) with an extensive explanation of probabilities and their uses in risk assessments. Chapter 5 (“Identifying and managing risk”) describes four risk identification approaches (six thinking hats, due diligence, scenario planning, risk mapping) and the risk cause‐and‐effect and prioritizing for risk management strategies. Chapter 6 (“Modelling risks”) proposes four methods for modeling risks – decision trees, expected value, dependency modeling, and stochastic models (using Monte Carlo simulations). The final chapter (chapter 7, “Making progress”) pulls from the prior six chapters the importance of risk literate marketers for specific marketing tasks, e.g. brand strategy development, new projects, strategic review, in organizational cultures.

Marketers are well aware of and continually deal with risks. However, these risks tend to be more short‐term in nature, such as failing to achieve monthly sales goals and not achieving an acceptable response to a promotional campaign. Building brands and their value is a long‐term effort – years and decades – that has ever so many challenges and pitfalls, such as maturity (slow growth) and brand extensions, and brand building requires the best decisions. I recommend this book for graduate marketing courses and marketing professionals. For example, Brand Risk offers any marketer, from a sales representative to a brand manager to a marketing manager, the framework for risk literacy and the opportunity to be more successful and accountable to and better collaborators with internal and external stakeholders. As Abrahams states:

The goals of risk literacy in (branding) are to make the brands and (marketers) more successful and the organization itself more understanding of the judgments made by its marketing people (p. 186).