Building public trust in a business after a scandal or an accident is as difficult as it is imperative. However, those companies that have had a reputation of being focused on their customers and other stakeholders have a much better chance of bouncing back from a mishap instead of losing all their clientele and survival with it. Therefore, it is advisable in any case to have good quality financial reporting and keep building and maintaining customer trust, irrespective of good or bad business timings. Higher public trust also means better strategies, higher sales, better customer retention, and therefore higher profits and growth. To ensure that the financial objectives of your business also coincide with building customer trust, you need to know how the two are interrelated. Today we will discuss that.
Building and Maintaining Trust
Internal strategic reporting: The first stakeholders affected by your financial reporting are your shareholders. This means that if your communication channels with them are not smooth, or if your financial reporting is not being done up to the required quality levels to keep your financiers appraised of the business situation, you will slowly start to lose their trust and ultimately their money. This also goes beyond the legally necessitated annual or quarterly reports. If your investors only have access to only as much information as the government, or everyone in case you publish your finances, there will be no special bond of your company’s management with your shareholders and that will adversely affect the trust levels.
Publishing financial statements: Taking ahead from the previous point, if your public financial statements are erroneous, and not just in terms of numbers and monetary details, but also in language or even grammar, that will send a bad message. If your company cannot pay enough attention to preparation of your financial information then how much attention are you going to give to preparation of your strategies or customer services?
Restoring trust after a scandal
The second part of the process comes in case there is a mishap. This can be anything from as big as Halliburton’s oil spill or as little as Protein World’s beach body ready advertisement billboard. The point is that sometimes, often inadvertently, businesses do cross a line which infuriates consumers and gives competitors a chance to capitalize on the disaster. In such times, the best way to do damage control is to make the targeted party focus of your marketing, as well as financial reporting.
Transparency and public service: The first thing to do to maintain public trust is to accept your fault and to pay damages to the affected parties. For example, if you are an event management company and due to unforeseen conditions a ticketed event had to be delayed or cancelled, ensure first to refund those who bought the tickets. In terms of financial reporting, this needs to be done by taking out a sufficient chunk of funds and making payments that are reflected in your periodically published information.
Climate change: Nowadays this is not only a genuine global crisis but also a sensitive issue for the majority population these days. If you are a petroleum company, or furniture business, or tobacco related industry, your financial reporting should also reflect the counter measures you are taking. The important thing here is that merely adding “Smoking kills” or “Consider the environment before printing this message” is not enough. Consumers, governments, and stakeholders need to see the effort your business is putting in to overcome the damage your line of business is causing to the environment, so be generous with that.
Cash reporting and disclosure of critical judgments: If your business has been through a lawsuit, or if you have had to pay a hefty fine for legal, environmental, safety, or any other sort of violation, do not hide it under fancy words, or lengthy insincere-sounding apologies. The first step in seeking forgiveness – in business terms restoring trust – is to acknowledge the mistake or the loss and then build up on it. Take corrective measures to avoid a similar incident in the future, and make sure to disclose the details in your financial statements.
At the end of the day, your board of directors will know what remedies you are taking, but the majority of people will only know about your company’s updates through your financial statements. So make sure to update your reports, add more accounts if necessary, avoid fancy jargon, and be sincere in making up for the loss that has been caused by your company, or the allegation of any losses on your business.