New media can distort how the public perceive risk; Companies need to know how to react

A newspaper stand

The public’s perception of risk is dependent on the media and this has serious reputational and branding implications for companies. Since the financial crisis began in 2008 this issue has become more relevant to risk managers. “The recent financial crisis prompted many questions and the discussion and debate around the effectiveness of corporate governance and the cost of getting it wrong suddenly moved from the boardroom into the wider public domain,” said Airmic board member, Nicola Harvey, in a Heath Gallagher report on corporate governance.

As technology develops we are consuming more media in different ways and news stories can spread like wildfire on social media and in the blogosphere. “When facts are only available piecemeal after an event, the media will often try to fill in the gaps to respond to the public demand for information - potentially changing the eventual outcome. Social media has in recent years taken this to an even greater and more powerful level - out of the hands of journalism and into the grip of the public and public interest pressure groups,” commented Rosemary Wilson, executive director at Gallagher Heath.

For example, the US government’s debt crisis was made worse by partisan media’s sensational reporting of events. In the US Fox News tends to report from a right-wing republican stance while MSNBC has a left-wing democrat point of view. Subjective reporting can leave the public ill-informed and distort their perception of risk.

These kinds of media and political crises that affect national governments also affect businesses and individuals. The phone hacking scandal that hit News Corporation demonstrates how it affects companies while the Uk’s recent super injunction scandals shows how it can affect individuals. “As a result of the rapid communications that can take place now, there is greater potential for misinformation. Companies have to be aware of this and plan their post-incident reaction with more regard to their reputation than ever before,” said Airmic’s technical director, Paul Hopkin. One way companies can avoid misrepresentation in the media is by establishing a direct link with clients and stakeholders by using social networking and video hosting sites. This allows businesses to effectively bypass conventional media sources and engage with clients directly.

The crisis and controversy that surrounded Quick, the French fast food chain in January of this year is a good example of how to manage the public’s perception of risk. On the 22nd of January 2011 14 year-old Benjamin Orset died after eating contaminated food at the Quick restaurant in Avignon Cap Sud.

Quick management reacted immediately using press conferences, Youtube, Facebook and its own website to express their dismay and establish a dialogue with the public. CEO of the company, Jacques Edouard Charret appeared on Youtube, the video can be viewed below, expressing how sorry he was for this tragedy and how “touched” he was by the offers of condolence on Facebook.

Charret went to explain that this was caused by a localised problem and was not caused by Quick products or its methods. He stated that this problem existed solely at the Quick restaurant in Avignon Cap Sud which had been isolated and shut down. In the video he goes on to explain how the company is dealing with the problem, and what he is doing to ensure a tragedy like this never takes place again. More videos followed continuing the dialogue with the public. This transparent and engaged response allowed the company to avoid a crisis.

This example demonstrates that risk managers need to be vigilant of how their companies are represented in all media and act decisively to mitigate possible exposures. “Companies have to understand where they are positioned and what their vulnerabilities are. Longstanding brand strength, customer loyalty and global reach can carry many businesses through PR crises. A cohesive crisis management plan (often built into business continuity planning) is crucial as is a clear communication plan agreed and practised before it is needed. This needs to respond to all stakeholders - not just customers, shareholders, employees,” added Wilson.