Social media: the less-noticed risks: not all the dangers associated with social media are compliance issues. Some often-unanticipated hazards include things like reputational risk. Potential damage can be avoided or controlled by developing a comprehensive social media program and policy.

• Author: Pry, Carl G.

MANY BANKS ARE STRUGGLING with whether to join the social media revolution or wait it out, for a variety of reasons:

* "We don't have the time, personnel, or funding to invest in social media right now."

* "We don't see these media as a productive use of our customers' or employees' time."

* "There is no way to measure effectiveness."

* "We have too many compliance and legal concerns to risk it."

* "We just don't know enough about social media to even know where to begin."

It's this last reason that plagues many of us. What is even out there? Can it benefit our bank and our customers? Maybe, the thinking goes, we'll wait until it's more established and we can see what others are doing and learn from their mistakes. But that time might already have passed.

Social media are not going away; if anything they are becoming more pervasive. Dismissing social media communications incurs real risks--consider who typically uses these channels: young (and increasingly, not-so-young) tech-savvy consumers who expect efficiency and convenience in their dealings with financial institutions. In other words, this is a desirable demographic.

These customers expect interactive rather than static content. Static content (profile or background information on your Web site, for instance) remains the same until changed. Because static content reaches a large audience, it is written broadly. In contrast, interactive content is just what its name suggests: It is tailored to an individual respondent or targeted audience and is based on specific needs.

Of course, interactive communication takes more work on the bank's part. Whereas static content needs approval only before being posted, interactive content must be continuously supervised. Some banks have gone so far as to appoint social media officers or committees to do just that. Leveraging social media is thus about much more than marketing (which we all do on our individual Web sites); it's about interacting with customers and prospects.

On the other hand, there are real risks to jumping too quickly into the social media frenzy. As we'll see, your bank must think carefully about how to present itself through this media. Many of the compliance implications were addressed earlier in articles in ABA Bank Marketing magazine (see, "Facebook Is Nice--But Is It Compliant?" ABA Bank Marketing, March 2010), but there are other risks that will be addressed here.

These risks can be controlled or avoided altogether by formulating a comprehensive social media policy and program.

Putting together a social media game plan

Assuming you've decided cautiously to proceed, what are the risks of using social media and how should they be controlled? There are three principal risk areas to address in a bank's social media program:

* Activities conducted by the bank in its official (branded) capacity.

* Activities by bank employees either as part of their official duties or on their own time.

* Activities by your customers or other members of the public.

Supervising official bank activities

Reputation risk Unsupervised content posted onto a social networking site, especially one representing the bank, poses significant reputation risk. Although the inherent risk should be no greater than that posed by what is posted on your bank's Web site, as always the devil is in the details. In this case, it's the devil of content control.

So-called "old media," such as newspapers, brochures, and yes, even good old-fashioned Web sites (does this date us?), involve the distribution of centralized content from one source to many. But in the case of "new media," social media included, interactive content is shared from multiple sources to many others, with content alterations possible with each subsequent sharing. It's like one big session of the children's game "Telephone," where the message changes a little bit each time it is shared--through being cut and pasted, or forwarded with edits or comments--until it sounds nothing like the original message. And if that eventual message, represented as coming from your bank, sounds nothing like what your bank intended, that obviously presents reputation risk.

Regulatory treatment. How do the regulators consider social media? Clearly advertising and similar requirements apply to content posted to a social media site. But what about content that has nothing to do with advertising? Are there any rules or pronouncements that provide guidance in this area? Unfortunately the banking regulators have not yet issued anything specific. But FINRA (the Financial Industry Regulatory Authority, the independent regulator of U.S. securities firms) recently released social media guidance for brokerages [FINRA Regulatory Notice 10-06, January 2010]. Although FINRA has no direct authority over retail bank operations, the guidance is useful for hints on how...