Are You Twittering or Frittering?

Welcome to the wild world of social media! The reality is that risk managers will increasingly confront corporate risks arising from employee use of social media and networking tools. To discuss the risks and opportunities flowing from social networking, we must define the phrase. We can begin defining social networking by offering examples: Facebook, Twitter, LinkedIn, YouTube, and MySpace.

We also can refer to social media as the use of technology blended with social interaction to create value. Many people link social networking to Web 2.0. Web 1.0 was essentially a one-way street of users logging onto the Internet and interacting with web pages. By contrast, in Web 2.0, users log onto the Internet and use it as a bridge to interact with other individuals.

Of course, social networking has existed for thousands of years. When my sons were in their teens, I was often reminded of a handy technology that let people communicate in real time: a telephone. Social networking uses the Internet to not only link individuals who are physically separated but also to foster collaboration.

Many companies hesitate to embrace social networking, fearing adverse consequences. Some reluctance stems from the newness of social networking tools. In other cases, upper management might be reluctant to become early adopters.

Demographics are another factor. Daily Facebook and Twitter use is not necessarily part of the typical CEO's or CFO's experience. Managers in their 50s or 60s may conclude that such tools are simply toys used by teenagers, not something that can be deployed for legitimate business purposes. This may bias corporate management toward conservatism regarding social networking.

Still, not all resistance to social media stems from senescence or paranoia. Company management may have genuine concerns about related risks. Paired with that concern is the inability to clearly see obvious advantages from fostering social networking within the organization.

Corporate Perils

Potential perils with regard to employees engaging in social networking include:

  • The "blab" factor. This refers to disclosing proprietary or confidential information about the employer. Social networkers may presume an unwarranted level of confidentiality and privacy in their statements. While computer keyboards have DEL or erase keys, the Internet does not.
  • The smear factor includes defamation liability for content posted or developed by an employee against a company or individual.
  • Corporations may fear loss of productivity because of excessive use of social media. This begs the question: Is it social networking or is it, well, not working?

As Goldberg Segalla, LLP, lawyers Dan Gerber and Michael Shalhoub state, "One inappropriate tweet could harm business relationships and cause loss prevention concerns."

Corporate reputations can suffer hits from social networking, which, consequently, represents a prominent risk to manage. For example, a disgruntled airline passenger wrote a song about how a carrier's baggage handlers smashed his guitar in transit. He posted the video to YouTube. The video was an instant hit, though a black eye for the airline. Within five days of airing, it received five million hits. In another case, disgruntled employees posted a video depicting a major restaurant chain as having significant food health violations. The video went viral and quickly received millions of hits. Reputational damage looms because of the power and speed of social networking.

From a personal risk standpoint, careless Facebook postings can get you fired. The website Urban Dictionary now includes the term, "Facebook fired" for job discharges caused by intemperate venting. Please consider that when you are tempted to post a Facebook status update, such as "I'm bored at work" or "My boss is a dork."

To manage social networking risks, some companies have added policies within their codes of conduct and employment manuals. These outline what the firm permits and what it prohibits in terms of social network communication and participation. Other companies use social networking as "virtual bulletin boards" to drive traffic to company-maintained websites and Internet forums. Thus, social media can boost business and have a positive effect.

Regardless of whether companies endorse or repudiate social networking, they ignore it at their own peril. Companies can monitor the web and assess their reputational status by using listening tools. These include search engine notification services. Others may include hiring firms to monitor what is said about the company on the Internet and in social networking forums.

Risk Management Approaches

Companies can employ various risk management tactics to address the potential perils created by social networking. Among these approaches are:

Avoidance. Forgo social networking to avert risks. Companies opting out of social networking are, in effect, pursuing avoidance. However, liabilities can still arise when employees of a company "freelance" and engage in social media that could create liabilities for the employer.

Retention. This may involve consciously setting aside funds to address whatever financial liabilities accrue from social networking activities.

Transfer. This may refer to both insurance and non-insurance contractual transfer. Such transfers do not necessarily shift liability. Rather, they shift the financial consequences of liability from one party to another. Contractual transfer via insurance involves purchasing, for example, personal injury liability coverage to address defamation claims that arise through social networking activities. In some cases, this personal injury coverage may be included in a company's commercial general liability (CGL) policy. Elsewhere, firms may buy stand-alone policies and coverage for media-related liability. Intellectual property coverage might cover some claims arising from social media use.

Loss control. Within the context of social media, loss control would prominently highlight usage guidelines for employees to follow and adhere to in their usage of social media. This would prevent loss or mitigate the extent of losses that do occur.

In competing for tomorrow's talent, risk and human resources managers should ponder the following statistic: A recent survey of teens showed that 88 percent of them use social media daily. Of those, 58 percent said their ability to gain access to these tools on the job will impact their employment choices. If companies ban workplace access to social media, then they must consider the prospect of losing the war for talent. Though largely uninsurable, the risk of talent atrophy is pivotal and one that successful enterprises must address.

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