By Kevin Quinley, CPCU, ARM AIC, AIM, ARe © 2009

Facebook, LinkedIn, YouTube and Twitter are all examples of social networking and Web 2.0 phenomena. These sites enable formation of online communities and interactive communication among risk practitioners. With the enhanced communication opportunities, however, come increased risks. Corporate America has likely only scratched the surface in terms of harnessing social networking to further its business aims.

The flipside is the dark side. Certain risks flow from social networking that risk managers need to be aware of. These include:

•Personal injury liability from employees writing inflammatory or defamatory statements on social networking sites.

•Liability of the organization for nonemployee defamation that occurs on a site hosted by an organization. Liability from failure to monitor forum content on social networking sites.

•Loss of productivity from employees frittering and torturing their time away on social networking.

•Potential loss of proprietary or confidential information leaked by employees on social networking sites.

•Trade practice allegations of over promoting products or services via social networking sites.

This is a burgeoning area of the law and potential liability. None of this is to suggest that companies pursue avoidance as a risk management approach to social networking. Doubtlessly, many organizations will take that approach. This is draconian, however. Risk managers will want to check their current liability insurance policies to assess whether they would address claims arising from defamation that occurred on a social networking site.

Additionally, risk managers should work closely with their human resources counterparts to fashion practical and realistic employee policies with regard to online social networking activities.

Social networking provides new opportunities for companies to communicate with and interact with customers and clients. It also provides new avenues and obligations for companies to monitor their user environment to see what is being said about them and protect their reputation. From an enterprise standpoint, there are many benefits to be gained by getting on board the social networking bandwagon. Social networking is not just for high school kids with ADD. Nevertheless, risk managers should not become too distracted by their own extensive job responsibilities that they overlook potential perils in social networking and fashion ways to manage around them.

What are you doing to manage the potential corporate risks of social media and social networking?