The social media world has been awash with news stories about fake news going viral on Facebook and Google.
The slugfest that was the 2016 US election opened a window for opportunistic writers to invent news that some people wanted to hear but did not necessarily have any basis in truth. If they are to be believed, a group of Macedonian teenagers told BuzzFeed they raked in $5,000 per month by aggressively creating phony stories that intentionally emboldened the political positions of Donald Trump supporters.
It seems that fake news has the ability to severely damage the reputation of organizations and people while calling themselves a parody publication or distributing from a different country.
But can you insure against fake news?
The short answer is “yes”: through reputation insurance.
“Fake news is merely one more stressor on a company’s reputational value,” Nir Kossovsky, CEO of Steel City RE said. His firm specializes in providing reputation insurance for publicly traded companies.
It’s a segment of the industry Kossovsky says is booming, largely because of social media.
“The (reputation insurance) activity has doubled between 2015 and 2016,” Kossovsky said. “The cost of a reputation loss today is approximately five times, that’s 500%, greater than it was in 2011.”
Kossovsky is careful to point out that though he believes fake news will “probably” be a big risk for companies in the near future, exaggerated news and smear campaigns are the main function of Steel City RE’s coverage.
SafeOnNET, a Danish company specializing in online reputational risk, plans on entering the US market in 2017/18.
“I believe that digital reality has outpaced organizations’ view on how to be prepared against digital threats, attacks and smear campaigns, and that makes online reputation insurance all the more valuable,” William Atak, founder and managing director of SafeOnNet, said.
Kossovsky explained that the principal of reputation insurance is to make sure the operational and communications parts of a company work in tandem to ensure promises don’t outpace fulfillments.
The mitigation strategy comes from generating positive stories in the case negative ones come in the future.
“If a company has properly prepositioned a (positive) story, then fake news bounces off, it’s the Teflon effect. It’s the same thing as with Ronald Reagan,” Kossovsky said, mentioning the TV-friendly former president.
Steel City RE gauges the qualitative value of insuring reputation on the governance structure of a company, isolating their flagship product to publicly traded corporations, and on delivering on their promises to shareholders.
“It’s very hard to know what’s true, what’s not true, what’s credible within a short time window,” Kossovsky said. “For equity investors, this is exceedingly difficult because the markets move at a moment’s notice.”
Kossovsky pointed to financial instruments like a company buying back their own shares or issuing warranties as alternative communication strategies that speak beyond PR to the value of the company.
“One of the reasons reputation insurance is seen as a weapon now is because all media is looking the same and the credibility of one channel versus another becomes increasingly hard to sort out,” Kossovsky said. “In that type of environment, unambiguous types of communications like warranties speak volumes.”
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