Reputational Risk

Social Media: A Double-Edged Sword

Risk managers must manage social media’s risks while harnessing its speed and efficiency.
By: | December 10, 2014 • 2 min read

Something as simple as a hashtag can launch an event onto a national stage in a matter of hours. For companies and organizations harnessing social media as a business tool, that kind of attention can go both ways.

In Target’s massive cyber breach last year, customers unleashed their fury on Facebook and Twitter, at a pace too overwhelming for a corporate response to counter. The company has slashed its profit outlook for 2014 as it struggles to regain consumer trust.

Earlier this year, the New York Police Department started the hashtag #myNYPD, encouraging people to tweet friendly photos of themselves with officers. The marketing ploy backfired, however, when people shared photos of police brutality instead.

The pendulum can swing the other way, like the ALS Ice Bucket Challenge. The Facebook campaign prompting users to donate to the ALS Association — or record themselves dumping a bucket of ice water over their heads — raised more than $100 million and boosted awareness of the debilitating disease, according to the association.

While Facebook, Twitter and LinkedIn are the most common channels used by companies, more social media forums are emerging, and executives and risk managers must consider how to deal with the reputational and legal risks of those new channels while taking advantage of the communication breadth and speed of social media.

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The top social media risks are brand reputation; disclosure of proprietary information; corporate identity theft; and legal, regulatory or compliance violations, according to a survey and report by audit and advisory firm Grant Thornton, “Social Media Risks and Rewards.”

Of the 111 executives surveyed, 38 percent said their companies use social media to raise brand awareness, while 27 percent use it for recruiting. Fifty-five percent said social media will be an important component of future corporate efforts.

However, only one-third had a defined social media policy, and only 36 percent provided social media training for employees.

“A number of companies are adopting social media policies,” said Melissa Krasnow, certified information privacy professional and corporate partner with Dorsey & Whitney LLP.

But the language within those policies must comply with state and national regulations. For example, states have different laws governing whether employers can demand log-in information for employees’ private accounts.

In addition, the National Labor Relations Board has been aggressive in scrutinizing employer social media policies that appear too restrictive of employees’ speech and the “right to come together to discuss work-related issues for the purpose of collective bargaining or other mutual aid or protection.”

Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at [email protected]

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