Managing Risk in an Age of Social Media

CMOs can help educate board directors about brand reputation risks in the digital era and develop plans to address such risks.

In today’s transparent, always-on world, control of brand messaging has shifted from organisations into the hands of increasingly connected consumers. With the touch of a key, consumers have the power to share information about companies instantly on social channels and significantly shape brand perception. A single negative post about a company can go viral and create untold brand damage in a matter of minutes.

Despite this reality, the topic of brand reputation is not often addressed in the boardroom unless there is an immediate crisis—for example, if a company’s stock price plummets after an attack in social media. Although 75 percent of board directors identify reputational risk as a top concern in a recent survey, only 6 percent of directors say they are well-versed in social media issues.

In order to effectively advise organisations on how to manage brand risk and reputation in this new digital environment, board directors can tap into chief marketing officer ( CMO) expertise, ask the right questions, and help oversee the development of risk mitigation plans.

How CMOs Can Help Boards

As marketing becomes a more powerful channel for gaining customer insights, building brand, and driving growth, the role of the CMO has been elevated within organisations. CMOs are now fully empowered members of the Csuite, and they have important insights to share with their executive counterparts and board members about the brand, the digital landscape, and risk and reputation management with regard to social media.

The brand. Perhaps one of the most important contributions a CMO can make is articulating to the board exactly what the brand stands for and discussing how all internal and external communications are filtered through this brand lens. In an age of digital transparency, every communication must strongly reinforce the brand’s core values. One of the greatest dangers for a company in the age of social media is acting in ways that are inconsistent with its core values—or failing to act in ways that demonstrate brand integrity. CMOs are key drivers in ensuring that the strategic efforts of the organisation are closely aligned with the brand and its reputation.

The digital landscape. Another important role of the CMO is educating board directors about digital transformation and how new channels such as social media are affecting brand and reputation. CMOs can help directors understand how companies are using a variety of social media tools to engage customers, tell brand stories, collect market intelligence, leverage data and analytics, and communicate cultural values. Sharing examples of companies that are doing a good job reinforcing their brands on social media— as well as those that are not—can be valuable information for board directors.

Risk and reputation management. The CMO can also partner with the chief risk officer (CRO) in helping boards understand the risks posed to brand reputation by social media. The CMO and CRO can work together in managing risks that could have a reputational impact and develop plans to mitigate such risks. They can then effectively inform board members about the risk management structure and related crisis management plans focused on brand and reputation.

Asking the Right Questions

Board members who understand the brand and reputational risks posed by social media and make an effort to understand how brands are positioning themselves can better help their organisations prepare and respond to brand-threatening incidents. Board members can ask questions like these to help CMOs and other senior executives clarify brand positioning and mitigate potential damage on social media: • Are we demonstrating our core

values across social media? • Do we have the data to show that our actions on social media live up to our brand promise? • Do we have weaknesses that can be exploited on social media? If so, what are they and how do we mitigate exposure? • What are our competitors doing on social media that we are not doing? • If we are not pushing the envelope, why not? Is it resources, funding, lack of knowledge, risk aversion? • Do we have an employee advo-

cacy programme? • What are the potential scenarios in which our brand could be damaged? • Which tools are we using to monitor our social media channels and conversations about the brand? How are we using the insights to inform our strategy and mitigate risk? • Are we fully prepared to man

age an incident in social media? • Do we, as a board, have the right skillsets to properly oversee social media risks? • Have we developed and communicated the appropriate social media policies to our employees and if so, how are they monitored and reinforced?

Overseeing ment Risk Manage-

Organisations and their boards can take the following steps to help prepare for potential risks posed by social media:

Develop plans. Organisations can create a “playbook” that outlines different risk scenarios that may occur in social media, with step-by-step plans to handle these situations. A playbook can address issues including: • Brand threat level • Damage or potential damage • Decision-making processes • Criteria for involving the board • Specific steps to address the

crisis • Organisational

involved functions • Governance or oversight structure One of the benefits of a step-bystep plan is having answers in advance to some of the critical questions that may come up during a brand crisis and processes to follow. With this guide in place, organisations will be able to execute plans rather than having to create them on the spot.

Test and learn. Once a playbook is developed, it’s important to test it by “war-gaming” different scenarios that might arise. The brand threat may involve social media backlash around poor customer service, a tweet by a senior leader that reflects badly on the company, or inaccurate information about the company that is being disseminated in social media. Organisations can run through different scenarios and execute the steps to uncover flaws or missing elements. By conducting these drills on a regular basis, organisations and their boards can be better prepared if and when a crisis arises.

Share insights. Many organisations are using some form of social media listening tools to monitor conversations about their brands, and many are applying analytics on top of this sensing data to get a comprehensive picture of how their brands are performing. If they are not already doing so, organisations can consider sharing insights and metrics with their boards on a more frequent basis to keep them informed about brand performance, opportunities, and risks. In addition to regular reports, organisations might consider using more frequent electronic communications, such as online communities, social media feeds, and board portals to provide real-time updates on brand issues to keep boards better informed. ***

Social media channels provide many opportunities for brands, but they also pose significant threats. By enlisting support from CMOs, knowing which questions to ask, developing plans, and leveraging available tools, board members may be better prepared to help their organisations manage risk in the digital environment. For more information, please visit www.deloittedigital.com.mt