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Great football and cycling records aside, blind worship of iconic sports figures (or powerful senior managers) and their great results have led to a number of residual impacts that are worth dissecting further for edification.

For now, I'll limit my focus to Penn State and its once and former supercoach, Joe Paterno (though we now know that the records of both sports "greats" have suffered similar fates).

In fact, those at Penn State who were charged with key program leadership fell woefully short of acceptable levels of moral responsibility, at least according to most press reports.

While Penn State may be the ultimate example of the repercussions from a poorly managed reputational risk, it is also a morality play. It's about the risks of assuming the best of our heroes and the responsibilities of those with supervisory proximity to these icons. It's about failing to ask the right questions, failing to follow up on red flags and emerging evidence of potential problems and, ultimately, failing doing their jobs.

The risk parallels in the corporate realm are a daily reality, as power and perceptions of power drive similar behaviors that have some individuals act in ways they normally wouldn't.

Too many reputational events have been initiated and/or exacerbated by management engaging in a variety of destructive behaviors such as looking the other way; actively supporting a known bad behavior or bad decision; engaging in cursory or inadequate investigations of suspicious events; or focusing on how to "spin" the messaging in such a way that audiences won't be nearly as offended or better yet, where negative media can be avoided altogether.

Many of these behaviors are motivated by personal fear, incompetence, greed, stupidity and not infrequently, blind allegiance. It is this last driver that has the most potential to lead to very bad effects.

While the typical corporate reputational event is no match for the horrific nature of the Penn State matter, they are the loss events that can be the most destructive to value.

The institutional impact of Paterno/Penn State belies so much great enterprise risk management work that has been deployed in the academic realm in just the last five years. Witness the risk strategies that have emerged in the wake of Virginia Tech and other violent events that had the potential to literally destroy institutions.

One could have only hoped that Penn State had such a robust risk strategy so as to avoid this "event," but if they did, I have seen little evidence of it at this writing.

It is the blind allegiance exposure that raises the stakes so very high for all institutions and that raises the question of how to mitigate this nefarious foe vulnerable to every entity no matter how well run. It begs for a board-level intervention or a mandate that goes beyond the "best practice" risk governance strategies of even the most progressive entities. It begs for that all too rare human trait of bravery in the face of the most formidable personal risk: Doing the right thing for the sake of doing the right thing and, thus, possibly avoiding very catastrophic events.

CHRIS MANDEL is president of Excellence in Risk Management LLC, and executive vice president, rPM3 Solutions LLC. He can be reached at riskletters@lrp.com.

October 1, 2012

Copyright 2012© LRP Publications