Supply Chain Reputational Risk

Reputational risk is the possibility that a supplier will engage in activity (child labor, bribery, etc.) that negatively affects your brand perception. In a supply chain, it likely has to do with corporate social responsibility and compliance issues.

Reputational Risk Example: Foxconn Working Condition Controversy

Foxconn is an electronics manufacturing company based in Taiwan, producing products like Apple devices (iPhones, iPads, iPods), Amazon Kindles and PlayStations. Estimates are that Foxconn is responsible for manufacturing 40% of all consumer electronics worldwide.

In 2010, Foxconn was in the news because of a slew of worker suicides that were the result of bad working conditions. The stories were horrific, and their effect rippled down to the companies who used Foxconn as a supplier—most notably Apple.

The Foxconn controversy made headlines all over the world, and CEO Steve Jobs was forced to make a statement about Apple’s relationship with Foxconn. In the end, there were calls for Apple to address the problem, and, further, for consumers to boycott Apple products.

3 Things To Know

1. It Doesn’t Matter If It’s Not Your Fault

It’s all well and good—in fact, it’s crucial—to maintain a strict set of guidelines around your own brand. However, if you’re stopping there, then you’re not doing enough. As the Foxconn example shows, your brand reputation can be harmed by something that you’re not even directly involved in. It may not be your fault—but it’s still your problem.


2. Social Media is The New Brand Killer

Reputational damage has always been a risk for companies—but in the days of social media, this risk has never been greater. When news spreads like wildfire, you better be sure that you’re one step ahead of the game.


3. Regulations Are Only Part of the Story

When people think about reputational risk in the supply chain, they often think about regulatory rules and the backlash that could occur if they aren’t compliant. That’s relevant, but it’s not the whole story—as the Foxconn example shows, there are all kind of events that can trigger a reputational problem.

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