Recently a CEO of a major regional bank asked me what the risks were for the bank around social media. One of the issues we needed to discuss was customer satisfaction -- not just what customers might say on a feedback survey but more important what they might say on Facebook.
As Accenture reports in "A Comprehensive Approach to Managing Social Media Risk and Compliance" from 2012 to 2013 the social network audience leapt by 18 percent to 1.73 billion people.
This increasing use of social media needs to be taken seriously. It isn't just driven by our teenagers hooked on Instagram and MySpace or commuters with their eyes glued to their phones to distract themselves from the daily ho-hum drag, but it's also become a major corporate tool. By 2017, this number is expected to reach 2.55 billion people or about a third of the world's population. Furthermore, an annual report of Fortune 500 firms also revealed that 77 percent are active on Twitter, 70 percent manage Facebook pages, and 69 percent have YouTube accounts.
Social media is here to stay and it is embedded in our corporate world. Banks have long been battling social media-related risk: from negative stories during the global financial crisis going viral via Twitter to fake news stories about corporate performances that move share prices. But we are also noting to financial institutions that fraud risks from social media are likely to increase dramatically because of the Security and Exchange Commission's decision in early 2013 to let businesses conduct financial disclosures and release material information over social media platforms such as Twitter and Facebook.
What should financial services CIOs be doing to ensure their institutions are managing the social media risk?
Ensure your risk management team is regularly monitoring the banks' social media sites to assess vulnerability. Banks need to consider how social media activity can expose the organisation in terms of business, regulatory, legal and market risks. That means that risk-tolerance levels need to be defined and clearly stated across organisational lines.
Loop in IT teams as well. Advanced social media monitoring tools and technologies could help banks mine and analyse data to help streamline and deliver the solutions customers are requesting and simultaneously respond to criticisms appropriately.
Establish training initiatives across your institution for how to use social media so as to decrease risk -- not just from corporate blogs and posts but private ones as well. Also make sure that senior leadership has put social media on their agenda as an outlet to listen to and take seriously.
And recognise that monitoring social media isn't just for a financial institution's own reputational risk. Increasingly, we are seeing social-media savvy executives at banks use social media to gather input for their risk analysis of potential clients. This is data that can be placed alongside balance sheet inputs to determine the viability of repayment of debts or views on mergers.
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