Beware the dangers of Facebook
More businesses are using social media to sell products and services, but many aren't considering the risks associated with the online marketing, a top auditor told a Jamaica Stock Exchange conference last week.
By David Hall's reckoning, the new breed of entrepreneurs have no geographical boundaries, are young and bold, are less averse to risk, and are always looking for new opportunities.
However, when it comes to governance and controls, they tend not to be on the ball.
Social media provides a huge international outlet for local businesses. Facebook alone boasts over 800 million users, LinkedIn claims over 135 million users, and Twitter, with its over 100 million users active monthly, generates 250 million tweets a day.
But the risks associated with social media include using the tools in a way that is not aligned with the strategic objectives of the business, not determining who has oversight and execution and process risks, or in other words, not measuring the success of the online strategy.
"New entrepreneurs are using all the tools, and it's great," said Hall, the president of the Institute of Internal Auditors in Jamaica. "You have to decide how you are going to utilise the tools in a way that is aligned with company strategy."
Hall told Sunday Finance of instances of businesses established on Facebook not being aware of what's happening to its brand until feedback gets back to them indirectly. What's more, without controls, a company's brand or an employee could get tied to something that is undesirable and not in line with its strategic objectives.
For instance, a business that generates its revenue through the promotion and sale of music and doesn't rigorously monitor its use of social media tools could inadvertently get linked to a free file sharing website, which may ignore copyright laws.
"A policy that defines how you are going to use it needs to be put in place," said Hall. The policy, he added, could be used to determine who has overall responsibility and oversight for social media usage.
Furthermore, measuring the success of the strategy could boil down to determining "how many times requests through the media turns into a business prospect".
While speaking at the JSE Investment and Capital Markets Conference held at the Jamaica Pegasus Hotel in New Kingston last week, Hall defined corporate governance as "the combination of processes and structures implemented by the board to inform, direct, manage, and monitor the activities of the organisation towards the achievement of its objectives".
He said that after the management of a company agree on the underlying strategy, then it becomes necessary to monitor the competitive environment and adjust the strategic direction of the company, accordingly.
"If one or more critical assumptions are no longer valid, the strategy must be either revisited or exited depending on the circumstances," he said.
Another area for consideration is protection of sensitive and private information, especially in light of phenomena such as WikiLeaks, according to Hall, who comes from an background in IT and finance.
"Given the rapid change of pace, it is vital that board of directors and senior management view information security and privacy as a business issue and not just another IT issue."