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Business Protection Bulletin


By September 1, 2010No Comments

When just about any business these days is deeply involved with social media, it is apparent that these sites and tools have become mainstream. Indeed, it is hard to imagine that their use will not grow in coming years. They bring businesses to the places where their customers are and enable conversations. However, as with anything, the use of social media comes with risks of which every business should be aware.

The great thing about social media is that a business’s customers can talk about it. The bad thing about social media is that a business’s customers can talk about it. When they’re happy, social media is a boon, but when they’re not, it can be a public relations nightmare. A disgruntled customer can post a negative comment on Twitter or Facebook at 3:30 p.m. on a Sunday, and by 4:00 p.m. a few million people might have seen it or passed it on. There is little a company can do to control the spread of this kind of message.

A major concern with social media is that a business might unintentionally violate local laws and regulations, since messages on Facebook and similar sites spread all over the world. Among the areas of concern are:

  • Advertising — Businesses might land in hot water if statements on social media sites are false or misleading, if they improperly influence bloggers to write favorably about their products, or if they improperly use user-generated content.
  • Defamation — Not all countries defer to free speech rights to the extent the United States does. A statement that U.S. law might not consider defamatory might be just that under the laws of another country.
  • Privacy — Social media sites are easy to use. With little effort, employees can publicly reveal trade secrets, information about products under development, troubles within the business, or even private information about employees.
  • Employee use — Employees can create a “hostile work environment” (as U.S. law defines that term) by making inappropriate and derogatory posts about their colleagues.
  • Securities disclosure — If employees post information that could appear to be an attempt to manipulate financial markets or that appears to be insider information, securities regulators may take action against the company.

There are a number of steps a business can take to manage social media risks, including:

  • Developing and enforcing a company policy for using social media
  • Designating an individual as the point person for social media
  • Learning the requirements of every country’s laws and regulations
  • Reviewing insurance policies with an eye toward social media risks and purchasing additional insurance to fill in gaps

Social media sites and tools are important ways for a company to market and brand itself. However, they must be used with care and forethought. With the proper controls in place, a company can reap the benefits of social media while minimizing the risks.