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Reputation lessons of NatWest’s Farage fiasco

FinancialRisk & Crisis
Reputation lessons of NatWest’s Farage fiasco
Damian Reece Pink Background

By Damian Reece

The correct decision for NatWest and its Coutts subsidiary regarding Nigel Farage should have been to refrain from exiting him as a customer. I don’t say this with the benefit of hindsight after the chief executives of both organisations were forced to quit. Rather, it’s the answer screaming at you from the evidence put in front of the Coutts Reputational Risk Committee last November (all 40 pages) and NatWest’s own statements about its values on its website.

So, how did they get it wrong, and what are the lessons to learn?

Lesson 1. Actions speak louder than words:  Adopting Values Means You Must Live Up to Them Too

In private, NatWest decided to “exit” Nigel Farage because his publicly stated views were at odds with its position as an “inclusive organisation”, but it felt unable to say this publicly. But why? Why not stand up and say what it believed, rather than invent a cock and bull story about Farage not meeting the bank’s financial criteria? Doesn’t NatWest believe in its values? Why won’t it stand up in public and defend them?

The basic truth is that what NatWest says differs from what NatWest does. Its values and actions are not aligned. If it had not exited Farage, it could still claim to be an inclusive organisation that acts with integrity today. In addition, Dame Alison Rose and Peter Flavel would still be in jobs, and the entire NatWest board would not be under siege by justifiably apoplectic shareholders worried incompetents are running the whole £21 billion edifice.

Incompetence does play a large part in this farrago. The fact that NatWest took such a disastrous decision was largely because the people involved don’t understand what reputation risk is or how to assess it. This is clearly evidenced in the 40-page report that reveals the decision-making process. Secondly, NatWest people don’t understand NatWest values. For the Reputation Risk Committee of Coutts (and of the NatWest Group, which also knew what was going on), equality, inclusivity, and non-discrimination mean their exact opposites regarding clients.

It must have come as something of a shock to these committee-dwellers to realise that inclusivity doesn’t mean excluding customers for no good reason. But a shock it clearly was, albeit too late. They had exited Farage and, in the cold light of day, came to the awful realisation that they didn’t have a leg to stand on because their actions were the opposite of their values. If they’d wanted guidance, they could have consulted their own website, which says: “We celebrate and respect everyone’s strengths and differences” (my emphasis underlined). In the scramble to cover up their egregious mistake came the dissembling over Farage’s financial status, a botched attempt at briefing a journalist, and the reputation of Coutts, NatWest, Alison Rose, and Peter Flavel in tatters – not to mention the NatWest Board.

Lesson 2. Reputation Risk Is More Complicated Than You Think.

Throughout its deliberations on Farage, the Coutts Reputational Risk Committee focused on the reputational risks of having Farage as a customer. This stemmed from the fact that his status as a Coutts customer was in the public domain. Their first mistake was to assume that being in the public domain and the same fact being widely known to the public is the same thing. They are not. I would stake my Coutts mortgage (if I had one) on hardly anyone being aware that Farage was a Coutts customer (until now), and of those who did, I’m willing to bet virtually none of them cared a fig.

Why would they? Am I going to think less of Waitrose if Farage shops there? Or stop going to Lord’s because he’s a fellow spectator there too? In almost any potential controversy Farage might become embroiled in, his status as a Coutts customer would be utterly irrelevant. The only scenario where it might drag Coutts into the mire would be if Farage ever becomes involved in a financial crime involving his bank accounts with Coutts. Even if you accept this as a possibility, it is grounded only to monitor the risk and be ready to act promptly in accordance with the regulatory responsibilities required of the bank – and Coutts would get reputational brownie points for so doing.

Moreover, the Coutts Reputation Risk Committee was guilty of blinkered groupthink focusing only on the reputational risk of having Farage as a Coutts customer. There needed to be a meaningful discussion of the reputational risk of not having Farage as a Coutts customer. This is a crucial reputational risk that needs to be adequately debated or examined. Farage’s subject access request shows at least one voice that highlighted no legal grounds for exiting Farage and that he was likely to go public if he was exited. But the obvious reputational risks to Coutts and NatWest of Farage going public were deemed insufficiently serious (because they were insufficiently examined), and the wrong decision was made.

Whoever chaired the meeting failed to ensure a balanced and complete debate about all the reputational risks, clearly failing to understand that reputational risk is often multifaceted with many pros and cons. The evidence on which Farage was exited was woefully one-sided, with a reliance on negative press commentary about Farage from the Guardian and the Independent. August publications as both are, there was no consideration that Farage has many supporters in other sections of the media, or at least people willing to defend him.

One of the more alarming quotes from the Coutts document is: “…the media consequences are unknown should he chose to go public…” This shows a staggering lack of insight into the UK media. I could have told Coutts precisely what the media consequences would be of an irate Nigel Farage going public – I’ve seen it from inside a newsroom many times – he’d be gunning for you, and you have no defence.

The fact is there was minimal reputational risk of having Nigel Farage as a customer but substantial reputational risk of exiting him. Having Nigel Farage as a customer made some people on the Reputation Risk Committee feel uncomfortable, even ang. Still, they let personal feelings distort a rational assessment of the balance of risks, resulting in a less than ideal outcome.

Lesson 3. How Not to Brief a Journalist

A key reason why Alison Rose had to quit was her briefing of Simon Jack at the BBC. First, never let your CEO anywhere near a journalist when a crisis is still raging – even if the CEO insists. The journalist is bound to ask the “wrong” question, and your CEO is at risk.

As a journalist, I often had meetings with CEOs cancelled at late notice  – usually, a red flag that something was up – but in this case, it would have been obvious why NatWest felt it inappropriate for them to meet, and it was. Rose’s claim that she inadvertently left Jack with the impression the bank exited Farage for economic reasons doesn’t stand up to scrutiny. Jack returned and double-checked that he’d got the facts straight before broadcasting the story far and wide.

I am certain no British journalist will ever disclose a source, but Rose met Jack in a very public place, a charity dinner. They were seen talking together the night before his story aired. By refusing to deny she was the source for days afterwards, Rose effectively outed herself as the source of the misinformation. Her eventual admission and resignation were inevitable. If you’re going to brief journalists, do it discretely, deploy a trusted but dispensable PR Johnnie and try it face to face over a coffee. Failing that, a phone call which could, if challenged, have been about anything. There are lots of ways, just don’t send in your CEO.

Lesson 4. Beware The Subject Access Request

Any seasoned reputation adviser will tell you that subject access requests are the bane of corporate life. In a more transparent world where any electronic conversation is potentially disclosable, you must be careful what you say, and the language used. Of course, companies must be able to interrogate situations and risks most robustly, but everything you now say that’s committed to the record can be used against you. As Coutts has discovered, appearing to endorse the opinion that your client is a “disingenuous grifter” was unwise. I don’t believe that Coutts or NatWest ever considered the possibility that he would deploy a subject access request if they exited Farage and he went public. If raised in the Reputation Risk Committee, the chair might have paused to think twice about their direction. Subject access requests exist for a reason. They allow individuals to hold organisations to account.

Lesson 5. Stick To Your Knitting

The sort of inclusivity that NatWest should be extolling first and foremost is financial inclusivity. For instance, congratulating itself on promoting financial literacy to all would be a far safer bet as a bank than acting as a moral guardian to a vast customer base representing the full spectrum of a liberal democracy’s values. Like all banks, NatWest has a long way to go in ensuring British people understand money and finance. Sort this out; it will go a long way to ensuring its desired inclusive and more equitable world. More broadly, ESG policies and corporate values have to align with a company’s business model and strategy. Otherwise, they become problematic very quickly.

Lesson 6. It Always Gets Worse Before It Gets Better

Farage now has NatWest and Coutts exactly where he wants them. Lawyers are being briefed, regulators are preparing to investigate, and 12-24 months of pain lie ahead. One positive is that the business is performing well, except the bank has just lost its CEO, and, of course, in this economic environment, banks making big profits is a reputation headache all its own. I predict more Farage-related disclosures to come, with more resignations required. Why wouldn’t compensation be on the cards? NatWest has a long way to go before it gets ahead of this story if it ever does. It’s doubly hard to effectively deal with a situation like this with a team of people who are clearly reeling from the last few weeks and, I’m sure, feeling bruised, angry, and probably humiliated.

Moving forward

  1. The bank needs to form a separate specialist Farage unit with new people to focus on achieving the best possible outcome.
  2. The day-to-day communications team must focus on business as usual (after all, people will continue banking with NatWest, come what may). The bank cannot allow this disarray to distract from its performance.
  3. The new Farage unit needs senior reputation, comms, legal, political, and investor relations input to map out the next period, the full implications of the affair for its business, and the likely legal, regulatory, and media risks and how these are best mitigated.
  4. It must lead the evolution of a new corporate narrative which must obviously stem from the findings of NatWest’s internal investigations.
  5. There’s no point pretending NatWest can make a positive out of this affair, but it can use it to improve its organisation. That should be the ultimate objective that will allow it to start rebuilding its battered reputation.

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