Business risks with Social Media

Business is fraught with all sorts of risks.  It's just the nature of the game and as with any new addition to the business toolkit, the risks need to be understood and managed.

This article will shed some light on the various potential risks to your business through the use of Social Media.  Saying that, "Risk" is often read as "Bad" or "We shouldn't do that because the roof will fall in". Rather than preventing your business from adopting these tools, this article will equip you with a basic understanding of the risks and some basic strategies so that they can be managed.  In that light, you should also read the other articles in this series that Social Media risks are understood within the context of the broader picture:

The risks associated with using Social Media as a business tool can be considered in four broad categories - Productivity, Information Systems, Legal and Brand.


Productivity is a valid concern for businesses.  Social Media is soaking up a lot of online time the world over.   The easiest answer here if this is a major concern is to block the use of the sites like Facebook and Twitter with your corporate network.

Personal opinion alert! I don't really think that Productivity should be a concern for most businesses.  It could be coffee, it could be cigarettes,  people will find ways of taking some time out.  If sites like Facebook and Twitter are blocked by the corporate systems, people will simply use their mobile phone.  It's my opinion that the better path is to educate, set guidelines and encourage employees to use these tools in a way that will benefit the business.

Legal and Regulatory

Legal and regulatory risks associated with Social Media are limited at this stage.  There are a number of activities to note though.  In 2008 the US Security Exchange Commission (SEC) formally recognised corporate blogs as coming under the guidelines for corporate disclosure.  2009 has seen the US Federal Trade Commission (FTC) improve customer protection by updating their guidelines around disclosure to include bloggers.  It is inevitable that further regulatory changes around the world will be required as Social Media matures for business use.  Both of these regulatory changes highlight the concerns about disclosure issues and practices that are possible in the Social Media space.  Businesses should be conscious of the impacts of any Social Media efforts that could be seen as misrepresentation or a lack of disclosure.  E.g. Paid product endorsements without disclosure.  Make sure your policies and those of the people being paid to endorse are appropriate.

One area that has yet to come under scrutiny is Privacy.  There is a lot of discussion about the privacy issues associated with Social Media site, and in particular Facebook.  As a business, privacy in Social Media is something to be watched.

Information System

As Social Media is inherently a set of communications tools on the web, the usual nasties of electronics communications and the web are all present.  Phishing, SPAM, Viruses and Malicious websites all feature.  Luckily the standard web protection mechanisms that businesses should employ will go a long way to mitigating risks to you information systems/information technology infrastructure.  Businesses should ensure that their network security systems that protect the corporate network from the web are up to date and reflect the usage of Social Media sites.


At this stage of Social Media's rise, Brand risks are definitely the most concerning.  If you remember the diagram below from Can Social Media make my business money, it highlighted the network of conversations that are occuring through Social Media.  These conversations occur out in the market with your customers and other stakeholders.  It also exists between your employees.  It also exists between your employees and your business stakeholders.  Discussions are happening both internally and externally without any involvement from your business.

Business network view - new - 391x310

In the diagram above, what happens when you cover the right hand side of the diagram labelled "Your business"?  You end up with conversations and discussions occurring between your customers and stakeholders.  This is the most important thing for businesses to understand in the Social Media world.  Whether or not you're a part of it, people will be talking about you.  Good, Bad and Ugly.  Businesses must, at a minimum be monitoring the conversations where they're mentioned.  Blogs, Facebook, Twitter, etc.  There are businesses popping up that provide this as a services - Reputation Management.  Without it, you might end up with a crisis on your hands like Cotton On did earlier in 2009 (about it here and here).

The other side of the equation is to consider the use of Social Media by employees.  Now it's worth remembering that this doesn't have to happen from work.  It can happen from an employees home so it's not simply a matter of blocking Social Media tools at work.  It's a question of education and guidance.  There are numerous examples of employees doing stupid things that's results in brand damage.  Check out what happened to Dominoes in the US (and the CEO response).  Scenarios like this are concerning for anybody responsible for the ongoing viability of a business.  Guidelines and education for employees are important here.

Wrap up

This has been an introduction to the possible business risks associated with Social Media - Productivity, Legal/Regulatory, Information Systems and Brand.  The key takeaway is that Brand risks appear to be the most problematic at this stage of Social Media's introduction.  It's important to be monitoring brand sentiment online.