Keyboard warriors and disgruntled customers just the tip of a growing iceberg
The Asia Pacific region accounts for more than half of all social media users worldwide, while nearly a third of all Twitter users are in the region.
This vast regional audience means that risks that emanate from social media are amplified to extents that are deeply damaging to the corporations impacted.
Factor in that social media is such a contemporary phenomenon, still being fully comprehended and analysed, and social media risks form a significant cornerstone of concern for today’s risk professionals.
The veil of anonymity social media can provide also means that so-called ‘keyboard warriors’ – unknown people posting negative views of a corporation online – can attack firms with the freedom of a person who is unlikely to suffer any consequences from their public acrimony.
Inherent in the use of social media are serious risks: reputational, business, strategic, and regulatory, just to name just a few, says Aliette Leleux, managing director and head of Accenture’s Asia Pacific finance and risk group.
Leleux says this does not mean companies should avoid utilising social media as it is a powerful way to reach customers.
“By 2017, the social network audience is expected to reach 2.55 billion people, or about a third of the world’s population,” she says.
“Furthermore, an annual report of Fortune 500 firms also revealed that 77 per cent are active on Twitter, 70 per cent manage Facebook pages, and 69 per cent have YouTube accounts.
“While these social media platforms can provide a way for firms to connect with their customers on a personal level, if something goes wrong, or the company makes a social faux pas, then the mistake is very visible and permanent for the world to see.”
Leleux warns that such mistakes may not always arise from internal errors: identity theft and cyber hacking of social media accounts could also result in negative publicity.
Amit Gupta, Accenture’s lead for finance and risk in ASEAN, says a significant sticking point when it comes to properly leveraging social media is dealing with the many risks to which organisations are exposed.
“Reputational and brand risk is the one most often discussed, and certainly it is a serious one,” he explains.
“Negative exposure on social media sites, or inappropriate or unauthorised action in the company’s name, can result in lost trust and lost revenues.
“Nonetheless, underlying these reputational risk lie other types of serious risk which include strategy risk, business risk, regulatory risk, legal risk and market risk.”
Mark Pearson, professor of social media at Griffith University, defines social media risk as, “any actions on social media by those associated with an organisation that might have strategic or legal consequences”.
James Griffin, director, advisory, KPMG, adds that social media risk is much more than just ‘customer complaints’.
“Irrespective of whether your organisation is in consumer goods or an industrial manufacturing, social media can be an accelerator of traditional risks such as reputational, operational and regulatory risk,” he says.
“Social media risk can occur as a result of inadequate internal controls or an external event that the organisation has no control over.”
The risk consequences
“Things can move quickly on social media,” warns Pearson.
“A company that is not geared for a strategic calculation of social media risk and with crisis communication experts and strategies in place can find itself battling vast reputational damage once a negative meme or message goes viral.”
Griffin says social media can have a material and financial impact on an organisation.
“The inter-connected world we live in means that social media does not occur in isolation. Significant and long-lasting brand damage, supply chain failure as well as fines from regulators are just some of the impacts of social media risk,” says Griffin.
“Falling prey to fraudulent activity or loss of confidential information is also a significant concern for companies who do not manage social media risk.”
Gupta adds that if not effectively mitigated, social media risks can lead to negative consequences including fraud, intellectual property loss, financial loss, privacy violations and failure to comply with laws and regulations.
Social media pitfalls and mistakes
Jeffrey Yeo, assistant director, Office of Enterprise Risk Management at Nanyang Technological University, says that one of the most common oversights by companies is the absence of a social media policy.
“Some companies periodically `refresh’ the comments made by users of social media, especially on their corporate Facebook page, by removing the negative comments and asking their administrators of the page to create fictitious Facebook account to `upload’ comments that are positive,” says Yeo.
“In the engagement with other users on social media, the golden rule is being upfront and honest. It would be detrimental to the company’s reputation by simply just delete comments that are not favourable and create fictitious users to shore up good publicity via fake comments.
“Knowing how savvy social media users are, it is just a matter of time before the truths are uncovered.”
Griffin says many organisations assume the marketing department is across the social media risk as they are typically the area of the business that manages social media.
“This is a dangerous assumption, as many marketing departments make significant investments in their social media activities but do not appropriately consider the risk management requirements,” says Griffin.
“A lot of organisations dismiss social media risk because they believe it is nothing more than customer complaints. This is a simplistic view and does not take into account the realities of social media risk, including the reputational, operational and regulatory risks.
“One of the greatest mistakes is not incorporating social media risk as part of traditional risk management reviews, and when something goes wrong, not knowing where to turn or how to respond.”
Pearson adds that another common error on social media is giving juniors or inexperienced staff members editorial control over social media campaigns or moderation.
Risk management measures
So what are the risk management solution to the risks of social media?
Pearson continues: “Social media risk management needs to involve assessing the risks attached to social media from a range of perspectives — those of both traditional stakeholders like employees, shareholders and consumers, alongside others who share social identities like environmental activists, parent groups and those with specialists interests.”
Pearson says companies need to understand that effective social media risk management requires investment.
“Companies need key personnel with an expert knowledge of social media marketing and risk,” says Pearson.
“If you choose to do nothing about social media you run the risk of serious brand reputational damage through sheer ignorance of social media campaigns that might be run against you by a competitor or because your corporate decisions have triggered a grassroots response from consumers, staff or other stakeholders.”
Leleux advises that to mitigate social media, while still garnering value from a social media strategy, companies need to implement governance structures, processes and technologies unique to the company.
“The C-suite should define risk tolerance levels and acceptable-use policies and have in place effective means for issue escalation and crisis management where necessary,” she says.
“There needs to be a single point of accountability in the governance structure that crosses lines of business — so that the CEO and other parts of the business are not sending out conflicting messages when issues arise.”
Leleux says a company’s risk team should have established advanced social media monitoring tools and technologies as these enable the risk organisation to: collect data from various social media sources; analyse unstructured data, such as information about customer sentiment, to enhance monitoring; provide insights into the company’s overall risk situation; and measure social media risk exposure according to the institution’s risk appetite.
A ‘contemporary risk’
Social media is a contemporary risk, it should be factored in to the organisation’s risk management framework, says Griffin.
“You cannot manage what you do not measure, so identifying the risks through a ‘social media diagnostic’ is the best starting point. Ask around the business to understand what, if any, risk management is in place for social media,” he says.
Gupta says a comprehensive approach to managing social media risk effectively includes governance, processes and information system, supported by leadership, culture, compliance and performance management activities that strengthen the human dimension of risk management.
Yeo says: “There is no way to totally eradicate the risks that social media brings but companies can reduce the probability of such risks becoming a reality.”
Yeo insists this is first achieved via the existence and robustness of the company’s social media policies.
“If a company still does not have one [a social media policy], it is high time to start crafting. For companies that already have one, the robustness of the policy and dissemination to all its employees is critical,” he says.
“With the presence of a robust social media policy, comes enforcement and periodic review to keep its policy relevant and up-to-date. It is also important in ensuring that employees are compliant with what is stipulated in the guidelines.”
Yeo adds that another vital risk management approach to social media is the emphasis of education and awareness for employees on how to engage and conduct themselves both as employees during office hours and as individuals after office hours on social media.
“As an employee, the rules of engagement are around handling negative comments on their company’s Facebook page or corporate blog,” he says.
“As an individual, it is about the rules of disclosure on their own social media spaces such as Facebook, their blog and Linkedin, just to name a few.
“Social media is here to stay, and for a long time. So are its risks.”