Social Media Risks Are Real Not Managing Them is Irresponsible
Social Media Risks Are Real, Not Managing Them is Irresponsible
Social Media Risks Are Real, Not Managing Them is Irresponsible

For many companies the barrier to adopting social media or expanding their digital marketing strategy is risk. These are not small risks; these companies have come face to face with a reality that many of us can’t even fathom. Social media could literally destroy their companies, it could lead to huge regulatory fines, compliance issues and a variety of other issues that can put a choke hold on how many marketers would consider approaching a social media strategy. But the reality is that all risks can be managed if we look them straight in the eye.

While it may not be sexy, social media risk management is a necessary part of every social media strategy. It is important to understand the potential risks social media can bring to any company and put together a plan that mitigates that risk. There are a few common types of risk that need to be considered.

The PR Disaster

Social Media Crisis GremlinEvery company has the potential for a PR disaster.  Social media can essentially take a PR issue and basically feed it steroids. It’s the equivalent of putting a Gremlin into a bath of water and triggering the spawning effect. This fear can cause companies who have tremendous opportunities for social media to literally refuse to even have a conversation about it. Social media becomes the evil gremlin that can destroy our company. And there are case studies to prove it’s not only possible, it’s a real risk. Netflix has become the poster-child for a PR Disaster that was fueled by social media. The results weren’t just a lot of negative publicity and outrage from their customers. It hit the company’s bottom line. The company’s stock price was $291.27 on July 12, 2011 which the company should call D-Day, the Day the company announced their over 60% price increase and their customers went to social media channels by the thousands to complain. On September 19, 2011 Reed Hastings published a video on YouTube apologizing that only made matters worse. By September 21st the company’s stock price had dropped to $128.50. Since then the stock price has dropped as low as $52.81 and is still struggling to get anywhere close to its original pre-disaster value, currently creeping its way up towards $95. While marketers may be thinking their executives teams are behind the times and “just don’t get it”, the reality is that this is REAL risk and something that can’t be taken lightly.

PR Disasters Can Be Managed

A Crisis Management Plan is Essential for Every Company

While Netflix pretty much did everything wrong in managing their PR disaster, other companies have shown that you can manage a PR disaster in social media channels. There have been great examples from companies like the Red Cross, FedEx, and Domino’s. The key is that companies need to have a crisis management plan in place that includes how to respond in social channels when there is a disaster brewing. This should include what types of crisis are possible, what types of content will be used to respond, what type of tone should be used in messaging, who will be involved in the response and timing around an appropriate response. To be done well this should be laid out in a decision tree style response plan so when people are in the moment and tensions are high, it’s as simple as following a clearly defined response path. In the moment, there will need to be adjustments but the key elements should be clear.

And the best way to get executives and compliance comfortable that a crisis can be averted is to actually test your plans. Companies should run crisis simulations and actually test out how well their team responds, whether or not the tone of their messaging will produce the intended result, and better understand what needs to be adjusted before an actual crisis hits. To be clear, this isn’t creating a “social media crisis plan” it is about integration of social media into the company’s existing crisis management plan. If your company doesn’t have a crisis management plan at all, it’s time to get serious about protecting the company’s bottom line and get one. Remember, the risk is real and while it can be managed it requires the up-front effort to be prepared before the crisis hits.

The Compliance Disaster

On the other side of the fence we have companies who face regulatory risk with social media. These are regulated companies who have to follow very specific rules for how information is handled. Financial industry has to follow FINRA regulations and SEC regulations; the Healthcare industry has to follow FDA and FTC regulations; the insurance industry is subject to state and federal regulatory law and looks to the NAIC for standards; and every publicly traded company is subject to SEC requirements for dissemination of public information.

I bet you wouldn’t consider Netflix a regulated company, but this just hit them square between the eyes as the SEC recently raised questions and may seek legal action over whether or not a Facebook post by CEO Reed Hastings contained “material” investor information that must be disclosed in a regulatory filing or press release to meet regulations for public disclosure requirements.

Every message that gets posted on a social media channel can raise compliance risk. And for pharmaceutical companies it’s even worse. If ANYONE posts a message directed to one of their social media accounts that mentions a negative side effect of a drug, they are required to report it to the FDA which could result in their drugs being pulled from the shelves.

Compliance and Regulatory Risk Can Be Managed

Compliance and Regulatory Risks are Easy to Manage. They’re Known.

This risk is actually far easier to manage because it is a known risk. While a PR crisis is a bit of an unknown entity that requires a vast amount of flexibility to respond to the crisis at hand, compliance and regulatory risk is clear. There are regulations that must be followed and companies will have to create clear policies for how to ensure that social media content follows them.

I think a lot of companies get caught in the conundrum of trying to use social media channels as an advertising and marketing “channel” which raises the highest amount of regulatory risk. This tunnel vision can prevent taking advantage of the real opportunity that social media channels provide; the opportunity to disseminate helpful content and build a robust content strategy that serves both customer and prospective customer needs. This requires an understanding of regulations to ensure that certain rules are followed, but it doesn’t have to be as big and scary as a lot of people think.

Once you sit down and look risk straight in the face, it’s easy to develop a plan to manage it. Don’t let the fear of the unknown stop your company from taking advantage of the opportunities social media represents. While the risks are real, the rewards can be very high, when managed well.

Are regulations and compliance concerns preventing your company from using social media channels? Social Media Explorer | SME Digital can help. Schedule a meeting with our team to discuss how we can help make innovation safe for your company.

Is your company facing regulatory risk? How are you managing it? Is your company terrified of a PR crisis? What tips do you have for companies that have real risk? Share your thoughts and concerns in the comments.  

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About the Author

Nichole Kelly
Nichole Kelly is the CEO of Social Media Explorer|SME Digital. She is also the author of How to Measure Social Media. Her team helps companies figure out where social media fits and then helps execute the recommended strategy across the “right” mix of social media channels. Do you want to rock the awesome with your digital marketing strategy? Contact Nichole
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  • nannasin smith

    they overlook the fact that social media can both cause crises, and be the tool that solves them. 


  •  Yes, In some circumstances it is going to be risky and you have to manage their risk which is not affected to our business.

  • Dara Khajavi

    This was a very important post. Social media is a great way for brands to communicate and connect with consumers, but it also forces companies to be open and perfect. A small mistake can become a social media disaster! Each brand needs to careful with what it posts. Social media means instant connection, which means bad or good news spread instantly also. 

  • Pingback: Managing Social Media Compliance Regulations()

  • Professional Copywriting

    Social media has become so entrenched in our modern
    lifestyle that most people don’t really consider the fact that they are
    publishing when they make a post. The idea that a small status update could
    precipitate a disaster would be something that most people wouldn’t have
    thought about. You have quite rightly pointed out that this is an area that
    most businesses should look at more closely just as they look at strategies for
    recovering from other unexpected events that might have a negative impact on
    their operations.

  • I think one mistake a lot of companies make is leaving all aspects of social media to a relatively junior member of staff. 

    Lots of companies still seem to believe that someone who’s young and has grown up with social media is naturally going to best placed to deal with business social profiles. They often overlook that social media is a marketing tool. But more importantly, they overlook the fact that social media can both cause crises, and be the tool that solves them.

    You can’t have a junior member of staff dealing with a digital PR crisis just because they’ve been facebooking their friends since day one. 

    I’ve come across lots of examples where it’s pretty obvious someone very junior has been left to deal with complaints. They’re asking for trouble imo. Especially if/when something goes *really* wrong.

    • I’m not 100% sure that the person on the front line necessarily has to be senior, but someone more senior needs to be the one who puts together the processes, policies and training for staff that will be responding. It’s kind of like someone you hire to work in your call center. You don’t let them answer the phones until they’ve been adequately trained, but the department head can’t answer every call. We have to empower front line employees with adequate training, in my opinion. What do you think?

      • Oh yeah, that definitely makes sense. With the right training and processes then you should be able to leave a relatively junior member of staff to it.

        I guess the problem is that many ‘corporates’ still see social media as relatively unimportant, meaning that they don’t see the need to invest in real planning or training, and are happy to leave managing their pages to any member of staff who has a relatively active Facebook profile.

        Sadly they probably won’t realise the error of their ways until they find themselves in the midst of a PR disaster.

  • I was talking to a company a few weeks ago that simply couldn’t see the benefit to engaging online, obviously it’s not everyone’s bag but to deliberately ignore it without pressing your ear to the ground to see what is being said is lunacy.

    I am at a stage now where I am beginning to think that even if you do not make social media part of your ongoing strategy that you need to have a plan in place if your community turn to online networks to vent.  It really should be part of the package.

    On a completely unrelated note – love the Gizmos!

    • Claire – Thanks for commenting! I think there are definitely companies where putting resources towards social media will have little to no return for their business and I’m usually the first to point out that it’s a waste of time and resources in spite of the other opportunities that a company has in front of them. But if the target audience is using social media and there are opportunities to provide them with information that can drive business goals and/or the audience is talking about the company social media makes sense to invest in on an on-going basis. But in every case, I think taking the time to do research to understand whether or not there is an opportunity makes sense and having a plan to mitigate risk is essential for large companies who have a lot to lose. 

  • Great post Nichole, and a topic still underserved in my opinion. My company spent an enormous amount of time in 2012 developing methods to help companies deal with this issue (what we call Social Scenario Modeling).  As we have clients in the pharmaceutical industry, I can attest that the issue of ‘Adverse Event’ regulation you mention is a very real and complex challenge. In particular because those regulations are regional and vary from country to country, but obviously the social medium doesn’t observe those boundaries :)  Healthcare in general provides some really interesting problems to solve including the legal implications of simply ‘listening’ to social channels at all.

    The thing I’d add above and beyond decision-tree’s and process orientation is that training and culture play a big part in this as it’s often not just about handing off to the appropriate people when a crisis (or opportunity) occurs, it’s being able to have the judgment to recognize that, and in some cases empowering those at the front lines to be better skilled at utilizing that judgment when expediency demands it.
    Thanks for tackling such an important topic and one that I don’t think most people have fully thought through.


    Matt Ridings

    • Matt – Thanks so much for joining into the discussion. I agree 100% that this is an area a lot of companies haven’t thought through. And empowering the front lines is a critical part of the process, this is one reason I recommend crisis simulations. Sometimes it’s hard to get executives to agree to empower the front lines, but when you run through a simulation and they see how much harder it is without that empowerment it is easier to get buy-in. 

      I mean who really would’ve thought that posting to Facebook could lead to a lawsuit from the SEC? These are important discussions and ones that require a multitude of people to be involved. Legal, compliance, communications, marketing, customer service etcetera. 

      The pharmaceutical issue is a really interesting one to debate. One on hand you would think the pharmaceutical company would want to know about adverse reactions to protect patients and I think most do. But on the other hand the regulatory environment almost penalizes them for receiving the information which creates a conflict of interest in my opinion. I think an environment needs to exist where pharmaceutical companies can get feedback about their products in a useful way without getting penalized for caring and seeking out the information. But we could spend a lot of time talking about that couldn’t we!

      I think Pfizer has done a really good job of building a content strategy around their rock star scientists, history and recruitment efforts to mitigate the risks but still take advantage of the opportunities social media offers.

      What do you think?

      • (Yes, I’m avoiding speaking about Pfizer directly :) )

        To be blunt, we’re really lucky in that our main pharmaceutical client is bought in from the board level down now.  I’d like to say that’s the ‘norm’ but I’d be lying.  It’s like any other policy driven process, if you just let the lawyers work it out you end up with only one side represented (risk mitigation).  That’s their job, eliminate risk.  Their job isn’t to evaluate opportunity which is then *weighed* against that risk.  So putting the right people into the room that act as counterbalances of interest is critical.

        We start most clients, regardless of entry point, with a Social Scenario Modeling session.  Not because it’s their primary need, but because it’s the best way we’ve found to date to start the process of companies thinking beyond their silos.  You cannot map a crisis scenario without needing the input and participation of a broad group of departments, (PR, HR, Legal, IT, etc.) this gets them all viewing the company more holistically and seeing how the tendrils of social are impacting them much deeper than they knew.  Since we focus on the internal side of social, social business, that’s a huge benefit and an easy way for clients to ‘get it’.  In addition, they realize that they don’t even have to participate in social themselves to *need* these types of plans in place.  


        • YES! YES! YES! I always knew you were smart. ;-) I’d love to chat with you about this more. We might have some opportunities to support each other and I’m looking for a good speaker in this space for Explore! Hint…hint! LOL


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