Turning a Manufactured Risk into a Risk Management Technique: Social Media

Many consider the use of social media as a very risky endeavor while others think this is a “manufactured risk” used as a reason not to engage in social media. After assessing the threat to your reputation, social media is not a risk – manufactured or otherwise – but rather an excellent technique for managing this exposure.

My most recent post, Social Media, Risks and Urban Legends: What are you afraid of?, discussed the term “manufactured risk” coined by Jeff DeCagna of Principled Innovation, LLC. A “manufactured risk” is one everyone talks about, worries about and takes to the extreme even though the risk is not that severe. I compared it to an urban legend – there is a grain of truth but the risk takes on a life of its own. The loss of control of your brand due to social media is a manufactured risk.

CB045952Peggy Hoffman of Mariner Management & Marketing asked in her comment to my post “. . . I too was struck by the wor[d]k risk and his great defn of manufactured risk. Maybe there are 3-5 questions we can ask ourselves to determine if a risk is manufactured or real – your thoughts?” Not  one to back down from a challenge (unless it involves possible bodily harm), a risk assessment can transform a manufactured risk into a “manageable” one (another of Jeff’s risk terms). In a risk assessment you:

  • Define the risk
  • Analyze the risk (frequency and severity)
  • Set your risk priorities

Define the risk

Losing control of your brand is not the risk since you never controlled it either before or after the arrival of social media. The best you can do is manage your reputation. John Eckman wrote in his blog, Open Parenthesis that:

Your brand is not what you say it is, but what your prospects, customers, partners, and employees say it is. In short, your brand is what the Internet says it is. You influence this not through marketing but through creating appropriate experiences and getting users exposed to those positive experiences. (Micro-interactions are ultimately assembled into and become brands).

The real risk is damage to your reputation by whatever cause also known as reputational risk. As you define your reputational risk which , consider:

  • What are the values exposed to loss? Your reputation.
  • Perils causing the loss. The main peril is someone publishing damaging information about your organization such as an expose or the disclosure of an awful incident (allegations of child molestation, employee embezzlement, product recall, or death at your facility). Reputational risk existed long before social media (i.e., United Way of America, The Nature Conservancy).
  • Financial consequences. A damaged reputation can have significant financial consequences. Negative public relations or media coverage can lead to decreased revenue due to loss of members, donors and sponsors and reduction in donations, conference attendance, certifications, and advertising. Your expenses may also increase because of unexpected legal fees, advertising costs, and hiring public relations consultants to help with the crisis.

Risk analysis

After defining the risk, you identify the potential frequency and severity of the risk to set priorities for managing each risk. Frequency is an estimate of how often a risk may occur, you can assign one of the following grades:

  • Almost nil – Extremely unlikely
  • Slight – It could occur but hasn’t
  • Moderate – Happens once in a while
  • Definite – Happens regularly

Severity defines the potential financial consequences of a risk – you can either keep or retain (pay for) the risk or need to transfer the financial risk to another party usually an insurance company.

  • Slight – You can retain the loss, the financial consequences are insignificant.
  • Significant – You can’t retain the entire risk and must transfer a part of it.
  • Severe – You must transfer the whole risk as it poses a threat to your survival.

Based upon the assigned frequency and severity grades you rank the order in which you address each risk. An exposure graded with “definite” frequency and “severe” severity needs to handle first.

For most organizations the reputational risk frequency level will be “slight” however a controversial organization may assign a frequency grade as “moderate” or even “definite.” The severity rating will be between “significant” or “severe” depending upon the nature of your organization. Base your ratings on an incident receiving significant media coverage; not when “someone says something bad about us.”


Social media enables your organization to monitor what people are saying/writing about your organization, employees, competitors and industry so you can prevent an incident evolving into a crisis. Justan Kownaki supports this benefit in a Social Media Club blog

No one controls their brand, but social media allows you better manage your brand’s perception in real time. More importantly, it helps you understand what others are saying about you (and why), so you can identify any disconnect between what YOU think your brand stands for and what OTHERS think your brand stands for.

Additionally social media is crucial to your crisis communication plan by minimizing the adverse impact on your reputation. An analysis of the recent recall of Maclaren Strollers offers insight into the benefits of social media in a public relations/media crisis. Jeff Rutherford in his blog, Using Social Media for Crisis PR – What Maclaren Could Have Done Differently, offers an excellent road map for how Maclaren could have used social media to handle its product recall better. Maclaren could have used Twitter, Facebook and reach out to parent bloggers to convey its concern about the recall and how to order the hinge covers to prevent future finger amputations.

So instead of being a risk (manufactured or otherwise), a well-designed social media strategy with tactics is an excellent technique to manage your reputational risk. Use social media to listen for what people are saying and crafting your response. Be sure to update (or adopt) your crisis communication plan to include social media to garner its benefits.

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