Social Media and Reputation Risk

Social Media and Reputation Risk

Despite of the many advantages that social media can have for organizations - facilitated searching, open participation, networking, dialogue and a increased mobility in terms of information flows - these same dynamics also increase risks. Organizations are not able to manage or control the contents of social media.
Aula (2010) argues that one of the main risks of social media is reputation risk, which means the risk of losing reputation.
Reputation risk can be harmful for organizations by increasing competitiveness, problems with positioning, decreasing stakeholders’ trust and loyalty, and by damaged media relations.

In general, there are three situations or ways in which reputation risk can increase, according to Eccless (2007):
1. When the gap between reputation and reality of an organization increases.
2. When customer’s expectations change.
3. When an organization cannot efficiently respond to external changes, because of poor coordination of decision making.

So, in what way do social media specifically contribute to reputation risks? Social media increases reputation risks through these same 3 ways of increased reputation risk:
1. First of all, ideas about organizations are often based on unverified information that can be either true or false. These ideas can and often will be different from what the organizations itself is or desires to be.
2. Social media generates new expectations about organizations, for example in terms of ethics, transparency and sustainable business. For example, social media also involves many forums in which users give their opinion about the activities and practices of organizations.
3. The organization as a user of social media can be the cause of reputation risks by its own social media activities. Many organizations have been caught for the fact that they changed online encyclopedias for their own advantage, or manipulate ideas about the organization by creating fake online content.
Sources:
Aula, P. (2010) “Social Media, Reputation Risk and Ambient Publicity Management” Strategy and Leadership Vol. 38 Iss. 6 pp. 43-49
Eccless, R.G. (2007) “Reputation and its Risks” Harvard Business Review Vol. 85, No. 2 pp. 104-114.