AIR Spotlight On Branding

Brand Management: Risk Management Of Brand Integrity

Mr Praveen Gupta, FCII , General Manger, Bajaj Allianz General Insurance in India, gives a personal assessment of the value of risk management of brands in the wider business scene.

rand interplay is part and parcel of market dynamics. Insurance is no exception. In a very simplistic sense, there is an insurer, an insured, an intermediary and a host of service providers impacting each other in their unique ways. Each manages itself in some form of formal or informal brand management. There are, however, aspects of brand management which overlap risk management. Foremost is the realm of managing international business risk be it a Bombardier; Unocal; Mozal or a Euro Disney. While each represents a different dimension, very often, beyond the traditional parameters of insurance and insurability, it is all about anticipating and nurturing the well-being of a brand. Take the case of Bombardier: no sooner did they announce the intention to launch a project linking mainland China to Tibet by train, the rest of the world did not seem to appreciate the idea. Hopefully, the risk managers would have picked the signals before getting into a Unocal or EuroDisney kind of a situation.

started operations in Mynmar in 1992. The consortium of investors included the French oil company TOTAL and Burmese and Thai investors. The project consisted of a pipeline to transport natural gas from the offshore Yadana gas eld into Burma and Thailand. Human rights and environmental groups were successful in mustering opposition to the companys role in the country. This eventually led to sanctions imposed by Clinton Administration on new investments by US companies in Burma. The Burma pipeline case illustrates the cost of ignoring ethics and supports the assertion that although ethical behavior for the rm can turn out to be costly, the risk of ignoring ethics may be costlier still. Pulling out of the whole deal in the end with attendant costs and loss of reputation was probably costlier. There seems to have been little awareness or identication of the risk impact of the company doing business with the regime.
Cultural Diversity and Uniqueness

Public Opinions Count

Anticipating increases in global energy demands, Unocal

The EuroDisney case, on the other hand, points to a situation whereby a business venture in which nancial risk had been thoroughly assessed and controlled was seriously undermined by a failure to manage risks associated with national culture. It had previously taken the American theme park practice and successfully transplanted it to Japan where there appears to have been fewer, if any, problems than those that arose in France. It only goes on to show that even in a highly risk-conscious organisation, the strategic risk management framework in use did not cater for soft risks such as national culture, thereby endangering the brand.
Branding Through Political Risks

EuroDisney

The companies involved in the Mozal project managed the major risk associated with their project more successfully than either Disney or Unocal. The risk of a brand entering a politically and economically unstable country (Mozambique) was minimised by involvement of a multilateral agency, the International Finance Corporation. There was only a residual risk for an IFC getting it wrong and any failure would call into question IFCs ability to assess the risk of large projects in volatile emerging markets. So
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March 2006

AIR Spotlight On Branding

here was a successful experiment of outsourcing risks by one brand to the other!
Risk Management Of Brands

What emerges from such illustrations is that not only corporate risk management does not encompass brand management but also risks which could fatally undermine a project (and the brand itself ) appear to receive insufcient attention. More empirical research is needed on how corporates approach soft, less nancially quantiable risks. As of now, the approach may be inadequate for the complexity of contemporary international business. While risk management of brands entering international markets is one area, it is also important to recognise how regional variations in brand building and management exist. Here is some learning from Building Brands without Mass Media, a recent HBR publication on Brand Management. Managers of brands in Europe have found that communication through traditional mass media has been ineffective, inefcient and costly. As a result, many European-based companies have long relied on alternative communication channels to create product awareness, convey brand associations and develop loyal customer bases. Six companies that stand out are The Body Shop, Hugo Boss, Cadbury Schweppes, Nestles Buitoni, Haagen Dazs and Swatch.
Senior Management Involvement

media: senior managers drive the brand building. They actively make brand building part of their strategic plans and, as a result, integrate their alternative approaches to brand building into their overall concept of the brand. In contrast, many US companies delegate the development of brand strategy to someone who lacks the clout and incentives to think strategically. Or they pass the task to an advertising agency. That creates a distance between senior managers and their key asset, the brand the driver of future growth opportunities. That distance, it is believed, can make the coordination of communication efforts difcult, resulting in confusion for customers, loss of synergy and performance that falls short of potential. An interesting allusion could be the level at which the risk-management function in an organisation reports into. The higher it is, greater the commitment and the safer the organisation.
Brand Essence Says It All

These successful European companies share one critical characteristic in addition to their reliance on alternative

But what is the big deal about risk management in brands and brand management of risks? In a complex world of insurance other than deductibles, excesses, cover limits, exclusions, et al newer forms of catastrophe and interruptions keep rearing their heads. Increasingly, insurance covers less and less of more and more. Moreover, in a world of outsourcing, it is not the physical side of the risk, but the brand essence that is most vulnerable. A well-managed brand, with embedded risk management, can outlive any physical calamity and go well beyond known barriers of indemnity.

www.asiainsurancereview.com

March 2006