Managing the risks of the rumour-mill

At a keystroke, these rumours have the potential to destroy corporate and individual reputations alike. Taken to extremes, they can even destabilise economies…

The banking collapse that wasn’t

Last December, a rumour spread via Twitter and Facebook that Latvia’s biggest bank was in trouble saw nearly 130 of Latvia’s cash machines run out of cash, as account holders queued to withdraw the equivalent of £12 million in less than three days. The bank’s Swedish owners finally managed to quash the rumours and the police opened an investigation into how they had started; so far without results.

Given the current economic outlook and the nature of the banking crisis that began in 2007, it’s perhaps understandable that people will believe a rumour about a bank’s financial vulnerability. Harder to understand perhaps is the way in which false rumours of mortality spread so quickly.

Tales of their death are greatly exaggerated…

Last year, rumours of the deaths of actors Morgan Freeman, Adam Sandler, Eddie Murphy and Charlie Sheen were all spread by social networking. Needless to say, they were - and at the time of writing - still are, alive. The ‘we never sleep’ nature of modern media means that rumours of celebrity death and divorce are often swiftly picked up from social networking sites and re-published as ‘fact’, reinforcing the validity of the rumour in a vicious circle.

Of course, rumours of celebrity death have always been a factor of showbusiness and little long term harm is done. The same clearly isn’t true for businesses where rumours can threaten their very survival.

Making a dog’s dinner of a meal out

The owners of a renowned Chinese restaurant in the UK had spent nearly 30 years building up its reputation and success before a bizarre rumour started last year that a diner had choked on a microchip identified as being from a retired greyhound. According to the rumour the police and paramedics had been called and the restaurant closed. In reality, the restaurant remained open and the owners left bemused by an influx of cancellations until they were able to set the record straight.

The first line of defence

Businesses need to ensure that their risk management systems take the risk of cyber slander and rumour very seriously indeed. As recent events in the banking sector have shown, reputation is everything - its loss can lead to a range of consequences from customers moving their accounts to significant loss in the value of shares.

Insurance products to protect corporate reputations are becoming more sophisticated. Lloyd’s insurers including Hiscox, Aon and Beazley provide ‘death and disgrace’ insurance to big brands to protect themselves from losses involved in having to terminate partnerships with celebrities who fall very publicly from grace.

Randy Nornes, Executive Vice President. Aon Risk Solutions commented: “We know that crisis events will hit most companies. Many of these companies will lose value even though they are right.  Perception impacts as much as reality. The speed of social media and 24-hour news media make pre-event planning and a well thought out response critical. Products such as that developed by Aon put the emphasis on pre-event activities to help companies prepare for reputation events.”

In the meantime, false rumours are a fact of life in the internet age. The need for businesses to take pro-active steps to safeguard their corporate reputation isn’t going away.

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