Social media training, a social media risk assessment plan, a social governance policy, and a risk-aware culture -- is all of this really necessary? Yes. For all the benefits social media have provided to financial service firms from marketing, referrals, and recruitment, the complexities and legal risks are still daunting, not to mention risks to reputation.
But going social cannot be avoided, according to a new Accenture paper, "A Comprehensive Approach to Managing Social Media Risk and Compliance." The number of social network users worldwide skyrocketed to 1.73 billion in 2013 and is expected to top 2.55 billion by 2017. In the US, people spend 16 minutes of every hour using social media. With momentum like this, "it is better to manage it effectively than try to stand in its way."
The legal and brand risks are understandably paralyzing, but at this stage, adopting social media is not a forward-thinking move. It's an obvious and inevitable strategy. Fortunately, early adopters have demonstrated that social media can be managed, and financial firms have yet to make headlines for a major accidental breach through social channels.
To keep it that way and manage the risks that social media present, Accenture has recommended a three-tiered strategy. Firms need clear guidelines to do this, policies, procedures, and policing on the background.
The first element of this strategy, risk governance structures, largely comes down to awareness of the risks from social media. For example, tweeting about a business trip may be nonmaterial and seemingly mundane information, but it could ultimately signal material information to interested outsiders. In this case, a savvy onlooker could notice many employees of a division are frequently traveling and piece together new business relationships, potential mergers, and so on. A burst of LinkedIn connections between two firms may indicate a partnership is forming before it's made public. Governance encourages policies and training, as well as defining "roles and accountabilities for specific types of social media risks."
Risk management process is also necessary to identify and manage risks and opportunities when they appear. "Processes will often look somewhat different in the social media world, in part because of the always-on nature of social networking platforms." the report said. Jonathan Narveson, a senior manager of Accenture Finance & Risk Services and one of the report's authors, says he is seeing firms set up social media command centers with dedicated individuals to track risks and opportunities across channels.
Finally, Accenture emphasizes advanced real-time monitoring technology to capture conversations about a company "from the standpoint of regulatory, business and brand risks."
The dependency on technology to monitor networks goes beyond knowing who is saying what and flagging overshares by employees (though that is important, too). Regulations require financial institutions to trace and report all customer complaints made via social media. That means every last grievance expressed through a tweet or Facebook post must be logged. Doing that manually is challenging, and the corresponding data storage is significant. Advanced tools will extract what tweets and posts are happening on individual social media sites, archive them appropriately, and aggregate for any reporting.
Financial firms are also leveraging big data tools and text analytic engines to mine meaningful patterns across the overwhelming amounts of unstructured data. Web crawlers and analytical engines can help track user sentiment and provide insights into the company's marketing strategies and risk exposure.
Though advancements continue to be made in the technologies that help prohibit and prevent oversharing on social media, the tools are still largely reactive. Narveson says they tend to be channel specific (mainly for the big three: Facebook, Twitter, and LinkedIn) and fail to identify potential risks proactively across platforms and profiles, like the accidental signaling of material information.
"That's where the culture element comes into play," he says. "Beyond policies and procedures, it comes down to instituting proper judgment at the individual level so employees understand what behavior is acceptable and who is held accountable."Becca Lipman is Senior Editor for Wall Street & Technology. She writes in-depth news articles with a focus on big data and compliance in the capital markets. She regularly meets with information technology leaders and innovators and writes about cloud computing, datacenters, ... View Full Bio