2018 has been a year dominated by data breaches. Companies from Facebook to Google and Marriott all fell victim to data breaches in the past 12 months. The incidents exposed personal information such as email addresses, credit card and passport numbers, and passwords, among other types of data.
A recent study conducted by Dublin City University (DCU) researchers, Social media and stock price reaction to data breach announcements, examined whether increased exposure on social media mitigated or compounded the cost and damage caused by data breaches.
The study examined 87 individual breaches across 73 publicly listed US companies that occurred over a four-year time period.
Disclosure of data breaches is a minefield
The analysis showed that social media exposure can exacerbate the negative impact of data breach announcements and increase the cost of the breaches themselves. On average, companies experienced an additional stock price decrease of 1.2pc.
The negative impact is even larger when the company discloses the breach via its Twitter account (a further decrease of 5.2pc on its stock price). An increase in the number of tweets over the event period and a large Twitter following also increased the negative result.
For other firms, the result can be slightly different. The study also found that the timely communication and disclosure of a breach can reduce the potential harm for companies that have relatively low visibility with traditional media such as newspapers. The impact for these firms is positive as social media allows them to disseminate information that cannot be disseminated through more established channels of communication.
Social media can be overwhelming for companies
One of the researchers, Dr Pierangelo Rosati of DCU Business School, said: “Social media has the expectation of instant feedback, and meeting that expectation is incredibly difficult in [the] midst of a crisis, and this creates a significant amount of pressure. The number of tweets or comments can be overwhelming.
“Also, once bad news goes viral, it is very hard for companies to keep control of the information flow. In the context of a company crisis, this may be particularly detrimental and worsen an already serious situation.”
He added: “There is a generalised positive view on the adoption of social media for firms’ communications. This study shows that communications departments and press officers should be more aware of the downsides and negative aspects present when it comes to crisis management, and allocate adequate resources to manage it.”
Twitter app. Image: prykhodov/Depositphotos
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