Risk management within German organisations in the context of Russia sanctions
: What can an organisation do to mitigate reputational risks?

  • Jens Michael Westrich

Student thesis: Doctoral Thesis

Abstract

The continuing Russia sanctions have raised the necessity for German organisations present in Russia to consider (long-term) implications to their reputation in both countries. With the purpose of sufficing external (e.g. Basel III in case of the banking industry) or internal regularities (e.g. stakeholder analyses in frame of an annual report), many German organisations have started to assess their general reputational risks in a structured way. However, there is little official guidance, which explicitly considers reputational risk management within the context of organisational operations in light of sanctions. Additionally, current research provides only limited findings in this respect. Therefore, there is a theoretical as well as practical need for a study regarding reputational risk management of German organisations in this context. In order to examine reputational risks in the afore-mentioned context, this study explores as a first step, the implications of the Russia sanctions for German organisations as well as risk mitigation measures in general. This is mainly achieved by a rigorous literature review. In a second step, a case study including the analysis of in-depth interviews with managers from German organisations of various types engaged in business in Russia accomplished the research aim to explore in which form these reputational risk occur and how they can be managed systematically. The results clearly show that there are virtually no significant reputational risks for German organisations in Germany in this context, whereas they indeed exist in Russia in several dimensions. For example, local Russian employees working with a (trade) compliance department of a German organisation and managing the impact of the – from Russian perspective – illegitimate sanctions can be compromised, when it becomes publicly known that they “collaborate”. Further, German businesspersons in Russia bear a reputational risk for either being over-compliant with Western sanctions or not advocating enough against these openly, as this behaviour can be perceived as disloyal by Russian partners. However, as reputational risks change over time, a repetition of the study in several years may result in a different picture. Additionally, the findings support the importance of stakeholder management – especially when conflicting interests of stakeholders are given – as part of risk avoidance, which is in the case of reputational risks the preferred risk mitigation measure as opposed to risk reduction, transfer or acceptance. This recommendation is based on the difficulty to predict the occurrence as well as the potentially very high impact of reputational risks. The findings are displayed in a proposed model, which offers a systematic orientation for managers in organisations engaged in the field of reputational risk management. Thereby, the model – although derived from standard models – is specifically designed for the given context.
Date of AwardNov 2021
Original languageEnglish
Awarding Institution
  • University of Portsmouth
SupervisorSara Hadleigh-Dunn (Supervisor) & Hans-Martin Beyer (Supervisor)

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