Reputational Risk in Social Media Age
With the advent of the age of social media, commercial, corporate sector and most importantly our very own personal lives have met a revolutionizing change; that continues to fledge blurring all boundaries. On the social media, nothing is a taboo anymore. All facets of daily life, controversies, innovations and even the minor detailing of an event or circumstance are brought to light. While they prove to be excellent venues for exhibiting the tiniest detailing of our daily lives and connecting with people, the commercial and corporate sectors also have embraced this as a source of effective marketing, promotion and branding of many products and services.
Social media websites have ceased to just serve the purpose of a chat room for discussions regarding, politics, travel, family, fashion, controversies and “what’s trending?’. They have now most recently emerged as an ever-evolving source of very valuable review and information on customer and third-party views with a magnifying, detailed focus on their attitudes, experiences and opinions. What’s the big news here? The same social media platforms that served as a platform and a podium for companies and business to promote and brand their products and services, and capture the attention of millions of consumers _ can now play a deterrent role in their tarnishing their brand image.
Reputational risks in the age of social media have unveiled many challenges for business worldwide. From the billion dollar multinational companies to the smallest of local businesses, entrepreneurs are realizing that a brand’s reputation is hard won, but so easily lost.
Social media has touched, not just personal lives, but the going concern concept of many businesses. With its mega explosion of diversified platforms, chat rooms and several online review websites; businesses realize that their reputation sought a fragility that is almost tangible. This fragility is more inclined to be tarnished even rapidly than in the past. How worse can it get? A corporate scandal can be widely trended and discussed on platform like Facebook and Twitter even way before the company’s chief executive officer gets to the wind about it! The depth of reputational damage inflicted to a brand’s public esteem from a surfacing scandal, controversy or incident can be destructive and very long lasting. Corporate history has seen that many businesses never fully recover. Let’s take the famous epitome of Arthur Anderson which was hit by reputational crisis by an association with the fraudulent operations of Enron back in 2001. There are many incidents were social media played the effective role in crushing aging and fine good reputation of some of the world’s most reputed businesses.
With the social media’s tendency to showcase a bad brand reputation, legal and regulatory compliance, security and privacy concerns, and employee mistreatment and human resource issues; many business are at crossroads about how to best handle this reputational risk.
With most businesses and companies attributing about 25% of the market value to reputation, it is not very surprising to know that the owners and leaders of the companies are personally becoming involved on a significant extend in the social media operations. They are making efforts by guiding their organizations towards such processes and tools and accumulating enough talent that can assist in preparing and effectively responding to erupting reputational challenges in the social realm today and in the unpredictable future.
The reputational risks morphing themselves into the social sphere opens venues for for a perpetual state of evolving risks. Users of the products and services are now vested with the power to communicate their dissatisfaction and discontent instantly to multiple readers across the globe through this platform of social media. While a lone, single complaint appraised by a user may get ignored, but if 50 or more users reach out with many complains, this can stir a bad whirlpool of reputational risk that can suck in the company’s reputation.
The trouble doesn’t end here; often reputational risks are not the only risk that can surface. Beyond this risk there rests the probability of strategic risks. Needless to say that the businesses realize the dire need to have their products or services aired and promoted on the social media. To fulfill this purpose a social media strategy is devised. It so happens that often this social media strategy fails to line up with and become compatible with the overall goals and objectives of the organization. This can create internal and external confusions and the organization’s crucial team fails to participate to achieve the main objectives collectively. Several recent surveys disclose that the reputational risk found is currently presenting itself as the number-one risk concern for business executives around the world with its inevitable tendency to chew down an organization to bits over the course of a single night. A reputational crisis hold the power to wipe down tens of millions of pounds from a company’s estimated value, and this risk has increased because the rise of online and social media means crises are now less predictable and more inclined to unfold at shocking speed. Reputational crises can be categorized into four main risk areas. Issues of ethics and integrity, such as fraud and corruption, arguably present the most serious cases of reputational risks. It narrates the different kinds of problems that adversely affect the banking industry that, seven years after the memorable downfall of the famous Lehman Brothers and the bailout of Royal Bank of Scotland and Lloyds Banking Group, trust is a thing of the past now, and continues to be so low because of interest rate and foreign exchange fixing, miss-selling and tax avoidance etc.
Again, security risks that can be categorized as both physical and cyber breaches have managed to secure a secondary level of concern. We have massive brand names to discuss in this category too. Sony had to face reputational crisis and suffer at both a consumer level, when PlayStation customers’ personal details underwent a breach of personal data of, and at a corporate level, when its Hollywood executives’ e-mails were hacked and certain imageries were revealed on the tabloids. Since then, Sony has succumbed to capture the glorifying global market share that it once possessed.