Understanding Social Media risks

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According to a recent report by SmartInsights, the total number of active social media users hit 2.307 billion in January 2016, with the total number of internet users reaching 3.419 billion. In percentage terms, this amounts to almost 46% of the world’s population. Unsurprisingly, the use of social media is becoming increasingly important in marketing and branding policies of businesses. However, in a recent survey conducted by FTI Consulting , 91% of board members and 79% of General Counsel interviewed by FTI Consulting admitted to not having a proper understanding of the risks posed by the use of social media. The risks posed by social media are real, and growing. Businesses need to be prepared to deal with these risks.

What is social media?

Social media refers to forms of electronic communication used for social networking and microblogging. It ought to come as no surprise that the most popular social media platforms globally are Facebook, YouTube, and Twitter, LinkedIn, with the likes of Pinterest and Instagram steadily gaining in popularity. In China, WeChat and Sina Weibo are the tools of choice.

It does not include traditional forms of text messaging or emails. For the millennials, social media is an integral part of their life. However, the use of social media is also increasing amongst those age 65 and above.

What is social media used for?

Businesses use social media for:

• Recruitment
• Branding
• Marketing
• Corporate Communications
• Information sharing

Individuals use social media to share ‘moments’, photographs, discuss social issues and their current activities. Frequently, the line between personal life and professional lie is blurred and moments from professional lives find their way into the personal social media feed of employees. If this does not alarm you, it should. With the growing number of number of Millenials, who are accustomed to oversharing personal information on social media, this risk is real.

What are social media risks?

The assessment and quantification of social media risks is still at its early stages. In other words, it is difficult to pinpoint exact risks presented by social media. However, it does not take a rocket scientist to figure out what the risks are. Underscoring social media is the sharing of information. The leak of negative information can lead to reputational damage and the loss of revenue. These are just the obvious risks. The unintended leak or sharing of information pose these risks as well:

• Legal – For e.g. Breach of Privacy Laws, Misrepresentation
• Strategic – For e.g. Loss of Intellectual Property
• Operational / Business – For e.g. Fraud
• Financial

All companies are vulnerable to social media risks, no matter how well-established the company is. For example, back in 2013, JPMorgan Chase planned to conduct a Twitter Q&A using #AskJPM. Twitter users hijacked the hashtag and buried it under an avalanche of attacks, forcing the bank to drop the Q&A before it started.

Another example of a social media disaster was when US Airways accidentally included a vulgar photo of a naked woman with a toy plane in a tweet. The company removed the post within an hour, but not before it was retweeted hundreds of times. The airline apologized and said it was trying to flag the image, originally sent to its account by another user, as inappropriate but instead accidentally included it in a message. It hasn’t used its account since .

The shipping industry is also not immune from social media risks. While social media platforms such as Facebook and Sina Weibo are great ways for the crew to keep in touch with friends and family, it can also be used by pirates and other snoopers with an interest and a threat profile. Back in 2010, a video footage showing a collision between a Chinese trawler and a Japanese patrol boat near the Senkaku Islands was leaked on Youtube causing protests across Japan and China and inciting responses from the US Secretary of State and both the Japanese and Chinese Government.

Managing Social Media Risks

Like all compliance risks, social media risks can be managed, if there is a proper understanding of the risks.

The first step to managing social media risk is for the board room to recognise that social media can have negative outcomes and to make the risk assessment of these negative outcomes part of its business case assessment.

The second step is to put in place clear guidance for employees on the use of social media for business purposes and for personal use. Employees should be aware of these risks and take responsibility for the information they pose on social media.

The third step is continuous monitoring of the effectiveness of policies and the risks presented by social media to the business. The social media world is fast changing, with new social media platforms being introduced on a daily basis. Technology should be utilized to monitor social media activity.

The fourth step is to update your social media policy to respond to new risks.


In an increasingly competitive market place, the effective use of social media to market products will become even more important to businesses. Protect your business by putting in place appropriate social media policies to respond to the potential risks presented by social media.

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