Pub. 7 2012-2013 Issue 6

March | April 2013 15 Extraordinary Service for Extraordinary Members. Reputation Risk: A Look at Social Media Leticia Saiid , Security+ T HE FEDERAL FINANCIAL INSTITU- tions Examination Council (FFIEC) recently released pro- posed guidance on social media. The proposed guidance, titled “Social Media: Consumer Compliance Risk Management Guidance,” doesn’t ex- press any new obligations for banks, but instead is intended to help financial institutions understand the risks as- sociated with social media and the risk management expectations. The key stages of managing the overall risk of social media presented in the proposed guidance are suspi- ciously similar to the risk manage- ment of other information systems. Basically, it suggests integrating knowledge from multiple depart- ments by consulting with on-staff technology, legal, and marketing experts to: 1. Identify the landscape and measure risks and benefits involved with engaging your bank in social media. 2. Determine necessary controls that should be effective in reducing risk. 3. Mon i t o r y ou r s o c i a l med i a environment. TECH TALK 4. Test your controls on a regular basis. 5. Report all of this data to senior man- agement to prove the effectiveness of your program. Most community banks limit their social media activity to basic commu- nication. If this describes you, your social media risk management plan should be quite manageable. If your bank has chosen to not participate in social media at all, you may find it surprising to know you still need a risk management plan. The proposed guidance addresses a separate topic that applies to all banks, regardless of your social media interaction choice: Reputational Risk. Once you have determined how your bank will engage in social media, your focus should be on monitoring and managing your bank’s online accounts. Your proactivity is the best formula for reducing reputational risk. Reputational risk is the risk aris- ing from negative public opinion. We all know, through personal or vicarious experience, public opinion can change on a dime. Reputation has a substantial hold on the size and type of your customer base. While there are reputational benefits of having a social media presence, like humanization of the bank and brand name recognition, there are also reputational risks. While you strive to protect that intangible asset of brand name and company value, your social media presence is a wide-open vulnerability. You may have a false sense of con- trol if you think the way your bank uses social media is negligible. Ev- erything done online matters because everything done online is permanent. To fully equip your bank for support- ing social media accounts, there are a few rules you can follow to make the best online impression and minimize reputational risk. Q Social Media — continued on page 16