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
Every 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.