Though compliance drives so many decisions in financial services, that's entirely not so with social media. Instead, reputational risk is a greater concern, according to a recent survey of audit professionals.
According to the 2014 Internal Audit Capabilities and Needs Survey by Protiviti, a global business consultancy owned by Robert Half International, financial services respondents identified brand/reputational damage as the greatest risk posed by social media. Compliance came in a distant second, with data security ranking third.
Drilling down, 53% of financial services industry respondents gave reputation risk a "No. 1" ranking among the hazards. By contrast, 19% named compliance as the greatest risk, and 9% selected data security.
The survey drew responses from 600 internal auditors representing all types of industries. Of those, 110 were drawn from financial services institutions; 76% came from US firms.
Social media strategy and maturity leadership
What's more, financial services institutions (FSIs) are countering social media risks faster than businesses in general. For example, 61% of financial services respondents said their organizations had a social media strategy in place, compared with 55% for all businesses.
FSIs are also further along the social media processes maturity scale, as measured by the Carnegie Mellon Institute's Capability Maturity Model. Just 32% of FSIs are still at the lowest rung of the model, the initial state, while 41% of businesses in general remain at that level.
Further, FSIs are moving up the maturity spectrum faster. In the 2013 survey, 40% of FSIs were at the lowest rung compared to 43% of businesses in general. In other words, nearly 10% of FSIs moved beyond the initial state level over the past year. Statistically, businesses in general stayed flat.
Despite being relatively more mature, neither FSIs nor businesses generally have reached the highest maturity levels. For example, only 2% of FSIs reported that their organization had achieved the top rung of five-level maturity scale, the optimized state. Also, just 9% said their organization was at the second-highest level, the managed state. These findings mirror results for all types of businesses.
"While it's still early days for addressing social media risk at all organizations, the financial services are responding to reputational risk in the wake of the financial crisis," Ed Page, managing director in charge of Protiviti's financial services industry IT practice, told us. "Some, like Wells Fargo, have established 'war rooms' as a defensive posture." Other institutions "are taking a progressive position by considering how to take advantage of social media. This includes incorporating social media as part of their omnichannel strategy."
Adoption rates lag slightly
Perhaps consistent with concerns about reputational risk, FSIs do lag slightly behind in leveraging social media for external communications. Nearly 74% of businesses in general use social media to communicate externally. With FSIs, the figure is 69%.
"FSIs are still grappling with the fluidity of the medium," Page said. "For example, regulations require consistency, but the nature of the medium doesn't lend itself well to employees responding in a consistent way. FSIs are overcoming this by establishing policies where employees will invite individuals who comment via social media to move into a more private forum to continue discussions."
Interestingly, FSI auditor skill sets may be one factor in limiting social media process maturity. Half of the "needs improvement" areas identified by respondents relate to the skills necessary to move managers and executives to adopt new policies and procedures. These skills include confrontation (tied for first with time management), presenting/public speaking (tied for third with mastering new technology), persuasion, negotiation, and organization-wide leadership.
"In an emerging and fluid area like managing social media risk, these skills are even more important than they are in general," Page said.Anne Rawland Gabriel is a technology writer and marketing communications consultant based in the Minneapolis/St. Paul metro area. Among other projects, she's a regular contributor to UBM Tech's Bank Systems & Technology, Insurance & Technology and Wall Street & Technology ... View Full Bio