The Associated Press Twitter profile was hacked yesterday and a fake tweet about a bombing at the White House was published. The result was dramatic, the US stock market plummeted and only recovered about 10 minutes later when AP tweeted that it had been hacked and since locked its Twitter profile down. According to an AP release on Yahoo! News:
The false tweet went out shortly after 1 p.m. and briefly sent the Dow Jones industrial average sharply lower. The Dow fell 143 points, from 14,697 to 14,554, after the fake Twitter posting, and then quickly recovered.
A Securities and Exchange Commission spokeswoman declined comment on the incident.
AP spokesman Paul Colford said the news cooperative is working with Twitter to investigate the issue. The AP has disabled its other Twitter accounts following the attack, Colford added.
The Syrian Electronic Army claimed responsibility for the hack. This couldn’t be corroborated.
This is a dramatic example of a growing trend which is impacting more and more businesses whose reputations are being affected by negative sentiment. While this particular event was manufactured using a hack, many companies are finding their market values dropping in response to more sincere sentiment expressed by angry customers and other concerned stakeholders.
What makes these trends even more worrying for brands is that trading systems are increasingly automated and make use of proprietary algorithims to identify trends and respond. They are often not smart enough to detect hoaxes like the White House bombing tweet and their responses can have very real consequences nonetheless. According to International Business Times:
“I think there was a lot of damage done on that,” Sean Murphy, a treasuries trader at Societe Generale in New York, told Reuters. “Automatically electronic trading kicks in and they don’t know the difference between a fictitious story and the truth and immediately started to buy and took us right back to the day’s highs.”
One possible explanation for the event, if not for its severity, is that a vast quantity of equity trades are now controlled by computers that take their cues from proprietary algorithmic trading programs. One problem with such trading, however, is that it can create a snowball effect, albeit one that normally self-corrects. That was what happend in the May 2010 “flash crash” that lasted less than 20 minutes, but still erased more than $800 billion of market value during that time.
From a brand’s perspective, online reputation management is more important than ever before and not just from a warm and fuzzy branding perspective. It is crucial from a corporate governance perspective and is something boards should be concerned about and should be addressing. The days of a few negative tweets’ impact being limited to a few angry hashtags are over. If negative sentiment triggers viral responses, a company could see its market value crater and it may not be able to recover from that. The King 3 Code may not be mandatory and the JSE’s ability to enforce compliance with it may be limited, but a company’s stakeholders can cripple a business before unprepared managers have a chance to realise what has happened.
p>The starting point for most businesses is their policy and communications frameworks, both internal and external. Legal frameworks are important components and should be thoughtfully designed to support a company’s broader efforts to anticipate and manage these risks.