Banks Regulators Should Encourage the Use of Social Media as a Risk Management Tool

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Redondo Beach, CA – Banker and social media author, Jesse Torres, today encouraged federal and state bank regulators to promote the use of social media tools within the banking industry for the purpose of managing reputation risk.

Regulators and bankers generally agree that there is no more elusive, difficult to manage, and feared risk than reputation risk – particularly in today’s hyper-sensitive banking environment. As such it is of critical importance for bankers to establish within a bank's overall risk management program, a defense against reputation risk. The defense must ensure that the bank is aware of threats against its reputation and able to respond timely in order to minimize the effect that such a threat may pose. Properly deployed social media tools are able to provide bankers with a sound early warning system that can prevent major harm to a bank’s brand.

“Social media tools such as Twitter, Facebook and MySpace have become a great equalizer. Through the use of these tools, individuals are able to garner worldwide support in advancing their cause,” said Mr. Torres. “The days of writing letters to the company president are gone. Today, disgruntled consumers take their case to the Internet through social media tools in an effort to gain support. Causes that are successful can severely damage a bank’s reputation, affecting the company’s bottom line.”

Banks can minimize the effects of social media-based attacks by being an active participant in the social media, or Web 2.0, world. By making themselves available via social media tools and monitoring their presence in this environment, banks can leverage social media as an early warning system.

“Much has been said about social media as an effective tool for improving and maintaining strong customer relations and building brand equity. This same tool can also be used to protect banks from hits to their reputation. By being accessible and by responding in a timely, honest and transparent manner, banks can learn of and address issues proactively that would otherwise snowball into public relations nightmares,” said Mr. Torres. “Use of social media in this manner allows banks to add to their arsenal of risk management tools relative to reputation risk.”

In an effort to assist bankers in implementing an effective social media strategy, Mr. Torres wrote and released the 70-page Community Banker’s Guide to Social Network Marketing. The Guide is a social media and social network primer for bankers. According to Mr. Torres, “banks tend to avoid being on the bleeding edge of technological implementations. Now that social media has experienced significant growth, is starting to season and is being effectively used against organizations, it is time for bankers to evaluate how to best utilize social media within their organization as both a tool for customer relations and risk management.” The Community Banker’s Guide to Social Network Marketing is available as a free download at http://www.tinyurl.com/cbgsnm.

Jesse Torres is a banker and the author of The Community Banker’s Guide to Social Network Marketing (www.tinyurl.com/cbgsnm) and of the upcoming Social Network Marketing: Unlocking the Value of the Community. Jesse can be reached by e-mail at MrJesseTorres@gmail.com. He can also be found on LinkedIn at www.linkedin.com/in/jessetorres. His blog, Social Media and Banking, can be found at http://socialmediabanking.blogspot.com.

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