CHAPTER 11 Twitter Risk and Fake News Risk

Fake news is all the rage now. But this is not a new phenomenon. Just a week after the SEC announced its decision in early 2013 to loosen restrictions on the use of Twitter and other social media by companies, a hacker showed how risky a decision that could prove to be. When an Associated Press Twitter account announced to the world that the White House was under attack, the reaction from the financial market was instantaneous. The Dow declined 150 points and several billion dollars of market value was wiped out in a few seconds. It turns out the AP's Twitter account had been hacked, but the damage was done. This was not a scenario that was predicted but now it was one firms cannot choose to ignore.

Just as with the AP scenario, every Twitter and Facebook account is potentially a target. Were any public company's Twitter account to be hacked and incorrect news about earnings, acquisitions, sales, or other information released to the world, it would potentially have an instantaneous impact on the market. Unlike news of an attack on the White House, a false earnings report or proposed merger might not be so easy to quickly prove to be false to the world at large. As we move headlong into the instant‐news‐cycle‐driven world, firms should take a step back to evaluate the risk that this poses. Institutions must evaluate the risk posed by the proliferation of official firm social media accounts. Such proliferation multiplies the threat ...

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