What Yahoo Can Do To Rebuild Trust

Yahoo! Inc. YHOO is still reeling from a second wave of cybersecurity attacks, this time compromising over 1 billion accounts. The company is facing severe reputational risks, and its proposed acquisition deal with Verizon Communications Inc. VZ is at stake. Yahoo must take several steps to repair its reputation and regain stakeholder trust.

The General Case

According to Dr. Nir Kossovsky, CEO of Steel City Re and expert in business process risk and reputational value, there are three steps one must undergo to heal a damaged reputation:

“The purpose of an apology is to gain trust and give yourself some credibility,” he told Benzinga.

Asking what the chain of events was that led a failure to meet expectations and how it happened. The purpose of this step is to know where things went wrong.

Indicate that you are going to create a solution moving forward “that will repair what happened, but more importantly will prevent it from happening in a more systemic way. You want your stakeholder to believe and expect that it won't happen again, the only way to do that is to show you have made a systemic repair,” Kossovsky noted.

Reputational Value, Reputational Risk Explored

There are six business processes that underpin reputational value and are sources of reputational risks:

1. Ethical problems.
2. Innovation.
3. Sustainability.
4. Quality issues.
5. Security risks.
6. Safety.

“To restore reputation, which is all about expectations, you can't just fix something that went wrong in the past; rather, you have to set expectations that it will not happen again in the future. New industry standard, new cultural standard,” he said.

It is vital for Yahoo's success that the company integrates a sweeping solution, setting expectations that this will not happen again. This could mean some executives and directors may have to go in order to prove changes are being made. That is part of the absolution process.

With the Yahoo/Verizon merger at stake, it is essential that the company moves fast to reassure stakeholders that a cultural shift will take place. Verizon stated in its annual report that the greatest reputational risk the company faces is a cybersecurity breach, exactly the risk Yahoo poses to the company.

To regain credibility, a company must “indicate and acknowledge that you are going to create a repair solution moving forward that will repair what happened, but more importantly, will prevent it from happening in a more systemic way. You want your stakeholder to believe and expect that it won't happen again. The only way to do that is to show you have made a systemic repair,” concluded Kossovsky.