Enterprise 2.0 Legal Risks, Explained..

My last post helped to highlight some of the key Benefits and Risks associated with implementing Enterprise 2.0 within an organization. I’d now like to discuss the specific legal implications of implementing enterprise 2.0 within the banking sector and use the Commonwealth Bank as an example.

Malcolm Burrows, an Associate at Rostron Carlyle Solicitors, recently presented some of the main legal risks that organizations might expose themselves to, as a result of engaging in Web 2.0 networks:

“Loss of confidential information, Trademark infringement and loss of brand reputation, Copyright infringement, Discrimination, Misleading and deceptive conduct, Passing off, Organizational reputation risk, Breach of continuous disclosure obligations for public companies, Defamation, Privacy, Vicarious liability, Negligent misstatement, Occupation and industry specific risks as they are embodied in organization specific legislation.”

..Burrows, M. 2010. Submarines online – legal risks of social networking for organizations. Retrieved 22/08/2010 from http://www.rostroncarlyle.com/legalarticles/social-media-law-articles/submarines-online-legal-risks-of-social-networking-for-organisations.html

While – possibly – all of these might apply to a financial institution such as the Commonwealth Bank, I would like to focus on some of the main risks, I believe are important considerations in E2.0 deployments.

Trademark Infringement

Commonwealth Bank, (CommBank) like most Australian banks has been slow to join the social media bandwagon and – more specifically – does not seem to have an official Facebook presence. There are several pages on Facebook that have the name – ‘Commonwealth Bank’, none of which appear to have any official support/administration by the financial institution. This exposes a major risk in trademark infringement for the institution. Facebook users, who don’t appear to have any official affiliations with the institution, are running communities that utilize the organization’s trademark, without its consent; this allows potentially malicious content to be posted on the communities by Facebook users, about the bank. The Commonwealth Bank needs to look into this issue and work with Facebook to remove the multiple, misleading pages and to create a new brand image for the bank on Facebook. This will enable the bank to connect with its national customer base on Facebook, and possibly use the service to promote bank services and collect feedback about its operations.

Breach of continuous disclosure obligations

CommBank staff might also expose the organization to legal liability through their online presence/activity. For example, if they specifically endorse/recommend old colleagues on networking sites such as LinkedIn, who might be considering jobs in CommBank, which might be represented legally as a clear conflict of interests. Also, tweeting about daily tasks might reveal sensitive information about the operations of the bank, which might be easily analyzed by the competition. To safeguard against such issues, it is best to implement an effective social media policy which lays loose guidelines surrounding the use of social media for personal/professional purposes. Bank employees need to be instructed in the basic do’s and don’ts of information sharing on social platforms.

Reputation risk

One particular problem with social media is the possibility of disgruntled customers or ex-employees posting defamatory content that directly harms the brand image of the organization. For CommBank, in particular – this poses a particular problem which is difficult to control, especially taking into account, the nationwide customer base. If a customer were to post a blog/twitter update about a bad service experience with CommBank, it could possibly go viral, if left unchecked. It is therefore important for CommBank – and indeed, all financial institutions – to setup social media teams that can monitor content posted online across multiple social networks and develop frameworks for transparent, rapid issue resolution. These teams can then be used to analyse, recommend and initiate the best response in accordance with the social response framework.

This blog on legal risks for financial institutions such as CommBank is far from exhaustive, but the main object is to get the dialogue started. How can we develop better enabling frameworks for Banking 2.0? If this article ever gets to CommBank, or other banks in Australia, I would like to bring their attention to an article in the Sydney Morning Herald which highlights the inadequate social-web presence of financial institutions in Australia, as compared to other industries such as telecommunications & airlines:

..Knight, A. 2010. FB friends with your bank? Retrieved 22/08/2010 from http://www.smh.com.au/money/on-the-money/blogs/well-heeled/fb-friends-with-your-bank/20100615-yckf.html

About these ads

About Shri Ram
Senior Project Manager with 8 years of Information & Communication Technology (ICT) and business management experience in the private sector with key emphasis on program management, strategic project management, account management, vendor management and best-in-class product development utilizing PMBOK/PRINCE2/Agile Project Management Methodologies.

2 Responses to Enterprise 2.0 Legal Risks, Explained..

  1. Brett King says:

    Shri,

    On reputational risk there are many cases now in the public domain of banks who weren’t actively involved in social media and got seriously impacted, such as Citibank with the Fabulis debacle, Bank of America with the Ann Minch debtor’s revolt, and more.

    The perception that social media is a risk, is relative. The risk of not actively engaging customers in the social media landscape is becoming increasingly critical to retain, build advocacy and keep brand trust.

    Regards,

    Brett King
    Author – BANK 2.0

    • Shri Ram says:

      Brett,

      Good points, both. It appears, though, that there are just not as many transparent accounts of Enterprise 2.0 failures, or even of the risks around an ineffective or restrictive social media policy.

      Actually, I don’t believe that social media is a risk at all; perhaps it is just not for everyone. Organizations that engage in it or at least promote employees to leverage its’ potential, can benefit greatly; however, there might be certain risks around the absence of an effective social media policy.

      Regards,
      Shri Ram.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

%d bloggers like this: