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Gilles Hilary

Management

Preventing Social Media Armageddon

Four threats and their countermeasures

Published: Wednesday, June 15, 2016 - 17:11

President Obama has been injured in a terrorist attack on the White House. A tweet released by the Associated Press (AP) attests to this. It carries the company’s “verified” stamp of authenticity. The S&P 500 just lost more than $130 billion. Well, not quite.

The AP’s tweet was the byproduct of a computer hack by the “Syrian Electronic Army,” and naturally the U.S. president was never injured. AP quickly took its feed down and immediately notified its subscribers of the problem. The market recovered, but AP’s reputation as a reliable supplier of real-time news was damaged.

Social media are now ubiquitous in the corporate world and in our day-to-day life, but the risks they carry are not fully understood yet. The accessibility and fluidity of social media leave organizations open to significant risks. However, there are countermeasures organizations can take to prevent reputation disaster.

Four threats

There are four main threats posed by social media.

Fragging: Employees can intentionally try to harm their employer’s reputation. Take the case of HMV, the global entertainment retailer with more than $1.5 billion in annual revenue. In 2013, its Twitter feed suddenly turned bizarre. A message read, “We’re tweeting live from HR, where we’re all being fired! Exciting!! #hmvXFactorFiring.” The social media team had been downsized, and the 21-year-old in control of the account had a field day, airing the company’s dirty laundry in public. By the time the company regained control of its Twitter account and deleted the messages, they had already gone viral.

Leaking: Employees can also unintentionally hurt their employer. This can happen when they release information that is directly useful to adversaries. For example, information about your chief financial officer's vacation or the company's IT procedures can facilitate fraud by giving valuable operational information. Geotagging of pictures is particularly useful to understand executive travel patterns. An Al Qaeda manual recovered by the British police revealed that 80 percent of the information the organization seeks to conduct its attacks is available from public sources.

A different risk occurs when employees and other stakeholders engage in activities in their private time that are damaging to the organization’s reputation. Take the case of the university engineering professor who wrote a book denying the Holocaust. His departmental webpage, although not advertising his political view, is still online and not the best advertisement for his employer (the university had to issue a statement to publicly distance itself from the individual).

Hacking: Nonemployees can intentionally hurt an organization, and the AP example is not unique. For example, French television broadcaster TV5 Monde was recently the target of a cyber attack that took down its 11 television channels, website, and social media streams. However, the threat from outsiders is not limited to the cyber world. Spouses commenting on forums or posting pictures to share their frustrations about the company can be problematic. A few months ago, AOL CEO Tim Armstrong mentioned that the company had paid “a million dollars” in medical costs to employees who were the parents of “distressed babies.” One of the mothers, the wife of an AOL employee, became incensed at what she perceived to be a breach of her privacy. She launched a PR campaign that started with an interview in the online magazine Slate. Armstrong had to apologize.

Fumbling: Nonemployees can also harm reputations unintentionally. In 2008, the Italian tax authority made income data available online by accident and hurt a few individual reputations. A related situation occurs when someone wants to create a buzz by releasing controversial information. The goal is not to hurt anyone, even though this consequence may be easily foreseeable. A senior Uber executive suggested at a dinner that the company should hire opposition researchers to pressure critics in the media. A BuzzFeed editor was present, and since no one had informed him that the event was off the record, he released the information online. This again ended up in a public apology from the executive.

Countermeasures

To address this risk, we offer a four-pronged approach.

Mark: Threats need to be identified and linked to your general risk management processes. The different accounts should be identified and their ownership clearly established.

Measure: The risk materiality should be ascertained. For example, armed forces classify the degree of confidentiality associated with each document they produce (from freely available to a general audience to highly classified). This systematic approach is designed to reduce the risk that operations security is inadvertently compromised.

Manage: The best way to deal with a social media crisis is to prevent it. A natural response may be to impose additional layers of control, but naturally there is a tradeoff between reactivity (which is the point of having social media activity) and security. This may lead the firm to tolerate a certain degree of risk. Risks can also be treated to minimize their occurrences or their consequences. For example, embedded social media correspondents can be deployed through the organization to diffuse good practices and to provide a better picture of real company practices to risk managers. An “outboarding” program can be designed to ensure that employees leaving the company do so on good terms. The risks can also be transferred, either by outsourcing the social media activity to an external provider (and the responsibility that goes with it) or by purchasing insurance in case something goes wrong. In rare cases, the risks can be terminated by closing down the social media channels entirely. This option may be worth considering for small organizations but is unlikely to be possible for larger ones.

Monitor: Detecting emerging crises in matters of minutes can be critical, as the AP case has shown. A quick response may even turn a problem into an opportunity. Interestingly, monitoring social media can also help companies to detect a crisis in another part of the business. For example, companies such as Deutsche Telekom have deployed a technology in their “situation room” that can monitor social media activity around their company. This allows these organizations to detect emerging operational or IT issues as soon as they affect their customers.

Once these challenges are better understood, a crucial question is who in the organization is best positioned to take charge of them. Chief marketing officer, chief risk officer, chief information officer, or a new type of executive (such as chief digital officer) can all lay a claim on this. What is clear though is that, irrespective of your position in the leadership team, your company's reputation is at stake.

This article is republished courtesy of INSEAD Knowledge. © INSEAD 2016.

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About The Author

Gilles Hilary’s picture

Gilles Hilary

Gilles Hilary is an INSEAD professor of accounting and control and the Mubadala chaired professor in corporate governance and strategy. He is also a contributing faculty member to the INSEAD Corporate Governance Initiative. Hilary regularly teaches courses on corporate governance, risk management, financial analysis, decision making processes, and behavioral finance. He has an MBA from Cornell University, a Ph.D. from the University of Chicago, and a French professional accounting degree.