Strategy & Leadership

Emerald Article: Social media, reputation risk and ambient publicity

management
Pekka Aula

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Social media, reputation risk and ambient

publicity management
Pekka Aula

Pekka Aula is a professor of

communication in the
Department of Social
Research, University of
Helsinki, Finland
(pekka.aula@helsinki.fi). He
is the co-author of Strategic
Reputation Management,
written with Saku Mantere
(Routledge: 2008).

Case 1: When one of the worlds biggest air carriers, United Airlines, refused to compensate
a passenger who was a professional musician for breaking his $3,500 guitar in 2008, he
eventually wrote a song about his lengthy but failed negotiations with the company. Then he
sang the song on a derogatory music video posted on YouTube in 2009. His protest video
United Breaks Guitars was seen by millions of people in a matter of days, and as a result
the case received widespread coverage in both Internet media blogs, forums and news
websites as well as print and TV. Reacting to the groundswell of adverse publicity, the
carrier quickly responded with a settlement offer.
Case 2: Clothing company H&M became the subject of an unexpected scandal in New York
after a student found bags of its unsold clothes that had been mutilated and dumped in the
garbage by store personnel. Shocked that the store trashed the clothes instead of donating
them to nearby agencies that would have distributed them to the needy, the student
informed the New York Times. When questioned by reporters H&M store representatives
were caught off guard and refused to comment. Soon the story found its way onto Twitter, the
micro-blogging service. After public outrage quickly spread via social media the company
gave their first statement about the trashgate incident.[1]
Case 3: A car dealership in Finland found itself in an awkward situation when a customer
read an extremely insulting description of himself among some internal documents. The
incensed customer wrote about what had happened on an Internet chat forum, and from
there the story spread to the tabloid newspapers. Not only the car dealership, but also
officials of the importer of the car brand were pressed by the general media for comment
after there were indications that the incident would affect sales.
What is significant in these examples of corporate reputational risk is that the messages
were quickly spread via the Internets social media services, that the incidents were then
publicized and commented upon by the mass media, and that the negative publicity about
the incidents became a threat to both the reputation and business of the companies.

Social media as risk

Social media is characterized by interactivity participants freely send, receive, and
process content for use by others. Social media services include social networking, content
producing, the distribution of services and websites that are collectively constructed by
users (wikis such as Wikipedia), video and photo sharing services (such as YouTube and
Flickr), virtual worlds (Second Life), and diary-type websites (blogs). From the corporate
perspective, the most interesting and most popular social media services include the worlds
biggest social networking service, Facebook, music and entertainment-focused MySpace,
career-oriented LinkedIn, and the network service Twitter, which lets members send out
short messages via computer and mobile devices. The popularity of social media makes it a
forum that cant be ignored. For example, in a recent special report, The Economist

DOI 10.1108/10878571011088069

VOL. 38 NO. 6 2010, pp. 43-49, Q Emerald Group Publishing Limited, ISSN 1087-8572

STRATEGY & LEADERSHIP

PAGE 43

 Social media expands the spectrum of reputation risks and

boosts risk dynamics.

magazine commented that were Facebook, which has some 450 million users, a nation, it
would be the worlds third most populous after China and India. According to the report,
Facebook users post over 55 million updates a day on the site and share more than 3.5
billion pieces of content with one another every week.[2]
Social media has several implications for corporate strategic endeavors. In terms of
corporate communication strategy, social media and similar Internet services are
characterized by easy searching, open participation, a minimal publishing threshold,
dialogue, community, networking, and the rapid and broad spread of information and other
content via a wide range of feedback and linking systems. These dynamic, stakeholder
liaisons mean less corporate control over stakeholder relations and easy communications
between stakeholder groups. In terms of strategic reputation management, what is
important is that social media content cannot be controlled in advance and that content
cannot be managed in the same way as, for example, conventional media such as TV or
newspapers. In practice, this means that it is almost impossible for organizations to control
conversations about themselves.

Reputation at risk
Reputation risk, the possibility or danger of losing ones reputation, presents a threat to
organizations in many ways. The loss of reputation affects competitiveness, local
positioning, the trust and loyalty of stakeholders, media relations, and the legitimacy of
operations, even the license to exist.[3] According to research carried out by the
distinguished Economist Intelligence Unit (EIU), leading European managers consider
reputation risk to be the primary threat to business operations and the market value of their
organizations. EIU Director Daniel Franklin comments that despite realizing the importance
of reputation risk, organizations continue to neglect reputation risk management strategies
or do without them entirely. Such poor awareness results in part from a lack of research about
how to manage reputation risk and who should take responsibility for managing reputation
risk.[4]
Reputation risk has been added to the list of business risks that organizations must take
seriously. It is mainly an operative risk. Generally, operative risks involve non-functioning to
poorly functioning internal operations, systems, people, or external events that cause direct
or indirect losses to an organization. This can take the form of the loss of reputation. For
example, in its 2005 Social Responsibility Report, Senate Properties, an enterprise under the
Finnish Ministry of Finance that provides property services mainly to government customers,
identified its primary risks as the decreasing need for space by customers, reputation risk
and financial risk related to rising cost levels and the balance sheet values of properties.
Reputation risk does not only affect individual organizations; it can affect an entire industry.
For example, when the current global crisis first shook Spains financial sector, that Banco
Santander maintained a strong position was said to be due, in part, to its well-established
reputation risk management programs.[5]
The Finnish financial services company, FIM, recognized the importance of reputation risk in
its listing brochure for the Helsinki Stock Exchange published on March 31, 2006: The
ability of FIM to procure and maintain customer relationships and to hold on to employees
may suffer if FIMs reputation is damaged. If FIM is unable, or if it appears that FIM is unable
to solve problems that may create reputation risk, the operating conditions for FIM may
deteriorate significantly . . . If these problems are not handled in the appropriate manner,
excessive legal risk may be caused for FIM, which in turn could increase the number of

PAGE 44 STRATEGY & LEADERSHIP VOL. 38 NO. 6 2010

lawsuits made against FIM, as well as the amount and size of compensation claims, and it
may make FIM liable to law enforcement measures, fines and penalties.
The FIM example identifies several consequences of loss of reputation. In addition to
financial implications, damage to its reputation may affect the loyalty and availability of an
organizations employees, as well as the procuring and maintaining of customer
relationships. Even the existence of the risk is interpreted as a threat. The consequences
of loss of reputation and the realization of reputation risk are described as being either direct
or indirect. The consequences may be legal or financial and can significantly weaken
operating conditions. In the FIM example, it is noteworthy that not only real functional
problems (If FIM is unable) but the public impression of the situation (if it appears that FIM
is unable) matters significantly.

How does social media generate reputation risks?

In a recent Harvard Business Review article, authors Robert Eccless, Scott Newquist and
Roland Schatz identify three types of reputation risk factors:
B

Risk is increased when the gap between an organizations reputation and its reality grows.

Risk is increased by a change in the expectations of consumers.

When an organization is internally unable to react to changes in the environment, a highly

important source of reputational risk is poor coordination of the decisions made by
different business units and functions.[6]

It can be argued that social media expands the spectrum of reputation risks and boosts risk
dynamics.[7] In social media services, users mostly generate unverified information both
true and false and put forth ideas about organizations that can differ greatly from what
organizations share with the public that is, an organizations own idea of what it is or what it
wants to be.
Social media also fuels new expectations or beliefs about organizations, to which
organizations should respond. These expectations can include those created by the social
media about ethical business practices or the transparency of operations. In addition, social
media users spread opinions about what organizations should focus on in the future. There
are many social media websites that question the responsibilities and administration of
organizations, that demand transparency, and that reveal corporate irresponsibility.
In addition, reputation risk can result from an organizations own communication activities,
including their reaction to claims presented in the social media. Organizations have been
caught manipulating the facts in online encyclopedias, such as Wikipedia, for their own
benefit, as well as maintaining fake company blogs (fake blogs or flogs). The US
television channel Fox edited its entry in Wikipedia over a hundred times, while Wal-Mart was
revealed as the creator of a popular consumer travel blog. In terms of reputation risks, this is
a matter of creating a distorted reality that is intended to be favorable to the organization
but that harms reputation when revealed.

Social media challenges conventional strategy

Social media challenges conventional reputation management in three ways.[8] First, social
media is not just a channel for distributing corporate communications; social media is an

Reputation risk can result from an organizations own

communication activities, including their reaction to claims
presented in the social media.

VOL. 38 NO. 6 2010 STRATEGY & LEADERSHIP PAGE 45

 In social media, an organization cannot just look good; it has

to be good.

arena for participation in which organizations interact with the public. These interactions
create impressions that are important for each organization. Therefore, social media venues
are places where users can actively participate in the ongoing process of influencing
assessments of corporations.
Second, strategic reputation management should concentrate on ethics rather than
pursuing short-term interests. In social media, there has to be a clear line between how to
behave in order to live up to expectations and how to communicate a business goal. For
example, using anonymous people to influence a discussion or inventing customers to
recommend a companys products in social media is not only ethically questionable, but also
creates a reputation risk that should be avoided. In other words, in social media, an
organization cannot just look good; it has to be good.
Third, social media has the effect of presenting a collective truth. Users create and search
for information, gain knowledge, and make interpretations based on communication about
an organization. Once they have built a picture, they share it with others and the subjective
truth turns into a collective truth about what an organization is and what it should be. If
undesirable opinions about an organization go unchecked or unanswered, the situation
becomes difficult to correct. For this reason, reputation risk management should begin
before, and not after, reputation crises. This is also an effective way of reducing the
reputation risk prompted by the strategic changes. If an organizations relationship to social
media is restricted to communicating only a unilateral truth, the organization loses many
opportunities to act and communicate.

Nine tenets for leaders

Based on the conceptual considerations about managing social media, here are nine tenets
for corporate leaders involved in strategic reputation management:
1. The ability to perceive and avoid risks is essential to organizations in order to survive.
2. Instead of sophisticated, objective, and rational risk analysis, most people rely on their
subjective risk perceptions, which can be affected by such highly emotional sources as
social media.[9]
3. Reputation is a valuable, but highly fragile corporate asset.
4. Reputation risk will garner more attention in corporate risk portfolios.
5. The challenge is to create valid reputation risk categories and to quantify the implications
of the loss of reputation.
6. Reputation risk often originates from uncontrollable external factors, but corporations
own controllable actions play an important role as well.
7. The importance of reputation requires there be a specific guardian (such as a Chief
Reputation Officer).
8. Corporations must engage in proactive communication in order to prevent reputation risk
and to fix damaged reputations.
9. Reputation risk evolves and culminates in publicity, but in social media publicity is a
dialog.
The last tenet requires clarification in order to be strategically useful. It sums up the key
points characterizing social media as a new communicative environment for strategic

PAGE 46 STRATEGY & LEADERSHIP VOL. 38 NO. 6 2010

reputation management and a new participatory public arena that can greatly impact how
firms implement strategic decisions.

Social media revised: towards ambient publicity

In order to understand the effects of the convergence in communication technologies, new
social media, and the altered publicity landscape as they relate to strategic reputation
management, we can explore the possibilities offered by the novel concept of ambient
publicity (see Exhibit 1).
The idea of ambient publicity is built on the proposition in my book Strategic Reputation
Management, co-authored with Saku Mantere, that reputation should be comprehended as
interpretations among stakeholders: their stories, anecdotes, and other discursive elements
about organizations. In addition, ambient publicity draws on the observation that
conventional models of strategic management comprehend business environments too
narrowly as market environments that is, economic fields of competition where various
phenomena can be analyzed using microeconomics. The strategic management of
reputation in the context of ambient publicity requires a different yet parallel view. An
organizations environment should also be seen as a communicative environment of
meaning in which images, symbols, stories, myths, and rumors both fabricate and challenge
the organizations reputation.[10]
Organizations always strive to control the web using reputation management in order to
create favorable publicity. But by understanding ambient publicity as an environment of
meaning, organizations, their stakeholders, and the public become aware of a complex
narrative web that determines reputation. In the social media users interact and connect
continuously with organizations in all kinds of ways that give meaning to the organizations. It
can be argued that ambient publicity forms a ubiquitous communication and media sphere
in which it is difficult to identify boundaries between different media, content, and/or
content-producing stakeholders.

Four reputation strategies for ambient publicity

Companies should make their stance on dealing with ambient publicity explicitly clear to all
managers. Making use of the key characteristics of ambient publicity, reputation
Exhibit 1 The key characteristics of conventional and ambient publicity related to reputation, communication, and
stakeholders
Characteristics

Conventional publicity

Ambient publicity

Reputation
Context for reputation management
Reputation risk potential
Key constituents of reputation
Reputation risk management

Market environment
Moderate
Information, details, data
Winning the competition for facts

Environment of meaning
High
Images, symbols, stories, rumors
Unifying complex networks of meaning

Stakeholders
Stakeholders involvement
Boundaries between stakeholders
Informational motivation
Communication rules
Publishing threshold

Receiving, reading
Clear
Sending-receiving
Fixed
High

Participating, writing
Unclear
Disseminating
Messy
Almost non-existent

Communication
Venue
Key metaphors
Distribution of content
Costs of content production
Direction of communication
Distribution genre
Examples of the key actors

Media
Medium, channels
Broadcasting
Expensive
One-to-many
Mass communication
New York Times, Fox, BBC

Social media
Place, arenas
Crowd-casting
Cheap
Many-to-one, many-to-many
Mass self-communication[11]
Facebook, YouTube, Twitter

VOL. 38 NO. 6 2010 STRATEGY & LEADERSHIP PAGE 47

 Reputation risk management should begin before, and not

after, reputation crises.

management, reputation risks, and communication we can construct four alternative

strategies that firms can employ.
Strategy of absence: Leaders make a strategic choice not to proactively attend
conversations and content production about the firm in the context of ambient publicity.
The flow of information is mainly unidirectional from an organization to stakeholders.
Strategy of presence: Leaders encourage the firm to be attuned to the ambient publicity
about itself. However, reputation management is based on conventional public relations,
where a company aims to inform specific audiences via certain media channels. Specific
media, such as newspapers, are used to reach the intended audiences. The mode of
reputational communication is more monolog than dialog.
Strategy of attendance: Leaders encourage the firm to take part in social media
conversations as a listener, but also to collect, share and consider information internally
whenever the subject concerns the company or is important to the industry. Firms reputation
management consists of attending, but its awareness of the ongoing dialog among
stakeholders is highly valued.
Strategy of omnipresence: Leaders are closely involved in ambient publicity. Firms accept
the blurred boundaries between privacy and publicity, and stakeholders and media.
Reputation management follows the idea of multilogging compared to dialoging:
interaction with the public is complex, overlapping, and continuous. Because reputation
risks can emerge anywhere within ambient publicity, firms should be omnipresent.

Ambient publicity and reputation risks

When managing reputation risks it is important for leaders to be aware of and participate in
the social process of creating meaning.[12] Managing ambient publicity is both an issue of
corporate communications and of economics. This entails analyzing the conditions
surrounding an organization as both an environment of meaning and as a traditional
business environment.
Executives must now consider what kinds of concrete reputation risks are produced by
social media, what the consequences are when these risks materialize, how organizations
should try to manage reputation risks emerging from social media, and whether
organizations should have an ambient publicity strategy. From the strategic management
point of view, a major change will likely be the shift from a world of careful planning to one of
continuous uncertainty and risks. Because of social media everything an organization does
is profoundly public. Management of ambient publicity plays a central role in furthering a
firms strategic goals as it builds relationships with stakeholders, represents their interests to
produce a reputable company, and ultimately creates value for the firm by enhancing and
maintaining a good reputation.

Notes
1. The case descriptions are cited from the paper by Pekka Aula and Salla Laaksonen, Reputational
risk in digital publicity presented at the Viestinnan tutkimuksen paivat, February 12th, 2010,
Tampere, Helsinki.
2. The Economist, January 30th, 2010.
3. Jenny Rayner, Managing Reputational Risk: Curbing Threats, Leveraging Opportunities,
(Chichester, UK: John Wiley & Sons, 2003).

PAGE 48 STRATEGY & LEADERSHIP VOL. 38 NO. 6 2010

4. Economist Intelligence Unit (EIU), Corporate Reputation Not Worth Risking, (AON, 2007).
5. Jordi Xifra and Enric Ordeix, Managing reputational risk in an economic downturn: the case of
Banco Santander, Public Relations Review, Vol. 35, No. 4, 2009, pp. 353-360.
6. Robert G. Eccless, Scott C. Newquist, and Roland Schatz, Reputation and its risks, Harvard
Business Review, Vol. 85, No. 2, 2007, pp. 104-114.
7. See Pekka Aula, Altered images, Communication Director, Issue 10, 02/2009, pp. 76-79.
8. Ibid.
9. Paul Slovic, The Perception of Risk, (Virginia: Earthscan Publications Ltd, 2000).
10. Pekka Aula and Saku Mantere, Strategic Reputation Management, (New York: Routledge, 2008).
11. Manuel Castells term referring to horizontal, many-to-many forms of communication such. It is
mass, because it can reach a global audience, and it is self, because the production of the
content is self generated, self directed, and self selected, see Manuel Castells, Communication
Power (Oxford: Oxford University Press, 2009).
12. Susan V. Scott and Geoff Walsham, Reconceptualizing and managing reputation risk in the
knowledge economy: toward reputable action, Organization Science, Vol. 16, No. 3, 2005,
pp. 308-322.

Corresponding author
Pekka Aula can be contacted at: pekka.aula@helsinki.fi

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