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FLOURIS, KUCUK YILMAZ
THE MANAGEMENT OF REPUTATION RISK AND AIRLINE SUSTAINABILITY
Triant FLOURIS
Dean, School of Aviation Sciences;
Professor, Aviation Management, School of Aviation Sciences,
Daniel Webster College, Nashua, NH 03063-1300, USA
Email: flouris@dwc.edu
Ayse KUCUK YILMAZ
Assistant Professor, Department of Civil Aviation Management,
School of Civil Aviation, Anadolu University,
26470 Eskisehir, Turkey
+90222 3350580-6812
Email: akucukyilmaz@gmail.com
The ultimate goal of management is to maximize shareholder value via sizing risks which
include opportunities while minimizing threats which have negative impacts on corporate
sustainability. This is the focus of enterprise risk management. Reputation is an intangible and
vulnerable asset to any company. The management of reputation is crucial to both create and
maintain of value advantage. Company reputation is a critical risk since it can be destroyed
very rapidly. Both realities and perceptions can impact corporate reputation. Reputation risk is
often not incorporated into risk management practices in a holistic fashion. Airlines in the
globally warmed business environment should possess effective ways in making reputation
risk management part of their overall risk management. According to Bayer "Although
reputation is the quintessential intangible asset, a strong corporate reputation yields concrete
benefits - higher market value, stronger sales, and an increased ability to hire the best and the
brightest.1” Corporate surveys illustrate that the management of reputation risk has recently
started to be integrated with their enterprise risk management (ERM) function or another risk
oversight program by executive managers in companies of diverse sectors.
Corporate reputation is one of the most critical management topics in strategic airline
management as reputation has a direct link to sales. Corporate reputation is impacted by value
drivers of a company. And the reputations drivers can create value to company. Also, every
crisis is unique and every company is different. For this reason, crisis and specifications of the
company should be considered by management to an effective reputation risk strategy. The
management of company’s reputation should be taken into consideration very seriously by air
transportation (airline and airport) managers. This paper’s main research question is: “how
fundamental is the integration of the management of reputation risk with the enterprise risk
management (ERM) function of the airline.” The article argues that the integration of the
management of reputation risk with enterprise risk management (ERM) functions in the
airline can help airlines, just like other industry participants, achieve high triple bottom line
concept based performance (financial, social and environmental) and develop a clear
understanding of industry competitive dynamics.
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The Conference Board (2009), Managing Reputation Risk and Reward, Report, #1442-09-RR5, 2009, Press
Release / News, Retrieved 09/15/2009 from http://www.conferenceboard.org/utilities/pressDetail.cfm?press_id=3605
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FLOURIS, KUCUK YILMAZ
We propose a new framework in regard to this concept. In our framework, managing
reputational risk by enterprise risk management perspective includes following the following
key issues:
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Understanding of the strategic value of corporate reputation to the airline.
Integrate reputation risk management with ERM or other risk management programs.
Identify and prioritize the main causes of reputational risk.
Quantify the reputation risk together with all corporate risks.
Treat risks holistically.
Understand risk interrelationships within the business.
Develop an understanding of and build relationships with key stakeholders and take
social networking and new media seriously.
Communicate these causes to key management.
Enhance crisis management and have a crisis plan when all else fails.
Leading global airlines are concerned across economic, social, and environmental parameters
in their quest for sustainability. Considering a triple bottom line concept in the management of
an airline supports a company’s reputation. We assume that environmentally friendly
management (based on the holistic management concept focusing on the economic
environment, social environment, and the natural world environment) and sustainability based
efforts help accomplish the ultimate goal of airline business sustainability. This study aims to
make a contribution to the literature on the management of the reputation risk to airline
sustainability by providing an enterprise risk management based perspective and a new
systematic approach.
KEY WORDS: Airline, enterprise risk management, management, reputation, risk,
sustainability.
JEL Classification Codes: M100, M140, M190