Families under Threat: Risk and Reputation in the Digital World
12th June 2018
Long gone are the days where reputation management for family businesses simply meant keeping one’s name off the front page of the Sunday newspapers. In today’s dynamic digital world the reputational risks faced by families in business are ever growing. While the traditional media remain an important factor in the management of a business' reputation, all businesses must also be aware of the numerous other risks that now exist.
Disgruntled employees posting damaging content on social media, errant family members, the theft and leaking of personal data, guilt by association and adverse coverage of a crisis across various platforms are all examples of the type of reputational risks that businesses face. This is the case for small family enterprises as much as for global family behemoths. A particular difficulty these days is that damaging content or confidential information can become widely available across the internet within seconds and can be very difficult to remove. In this context, it is all the more important that families and their businesses are prepared to handle crises and issues.
This involves taking steps to ensure that possible reputational risks are identified and planned for. Appropriate measures range from keeping and constantly updating a crisis management plan, to ensuring that data (including, in particular, personal data) is held securely on any systems or accounts used by the business or those involved with it, to conducting a digital audit of the family's online profile in order to ascertain risk factors.
An additional factor for family businesses is the added layer of complexity that the familial relationships can create. Preparations and responses to reputational risk must be proportionate, robust when they need to be and, equally, measured where appropriate. However, the extra emotional element within a family business can present additional challenges in a reputational crisis. While responses to a crisis must, more than ever before, be quick and effective, it is equally important to avoid impulsive reactions that may exacerbate any reputational damage. It is increasingly difficult to put the genie back in the bottle once a statement is made or an action taken.
As will be evident from the steps referred to above, it is often necessary to engage a team of advisers, including those with legal, communications and cyber forensic expertise. This may sound like overkill and expensive, but anyone who has been through a crisis will know the benefit of forward planning. This can reduce or ideally avoid the invariably higher costs of responding to a developing situation. While some families may not historically have been accustomed to engaging with such a range of service providers, the value to any business of its reputation and, particularly for families, the importance of perceptions of integrity and sound judgment, mean that this is becoming increasingly indispensable.
A key point is that, while keeping affairs private and confidential is often extremely important to family businesses, this must be balanced against the general direction of travel towards transparency. This is evidenced by much of the recent coverage, and the ensuing negative public perception, of the tax affairs of families and high net worth individuals. The most obvious example has been the coverage arising out of the Panama and Paradise Papers, when a number of individuals and families were targeted by the media because of offshore financial arrangements. Those stories highlight that it is no longer enough, in the court of public opinion, to show that arrangements were lawful. The perceived benefits of strict confidentiality in one's financial and business affairs must now be set against the potential reputational risks and the ultimate impact that adverse coverage may have on the financial position of a family business.
Reassuringly, there are a number of legal tools available to protect family businesses. These include the law of defamation, rights of privacy and confidentiality and (ever on the rise) data protection legislation. The latter is becoming an increasingly prevalent cause of action in the world of legal reputation management. While the way in which a business processes personal information can be a potential reputational risk (for instance in the context of a data breach, as the recent Morrisons case demonstrates), it is also a tool that can be deployed effectively by individual family members to protect their own reputations.
The so-called 'right to be forgotten' (which is codified in the General Data Protection Regulation, coming into force on 25 May 2018) is already being utilised frequently to tidy up individuals' online profiles. The recent case of NT1 and NT2 v Google, where one of the claimants succeeded in obtaining an order requiring details of a previous criminal conviction to be removed from search results, demonstrates the potential effectiveness of this right. And another useful element of data protection law is that an individual's rights may be engaged even where the thresholds for a defamation, privacy or breach of confidence claim have not been met. That being said, those more traditional causes of action remain very important, particularly in the context of a serious reputational crisis involving false and/or highly sensitive information relating to the family business or the individuals within it. The result of all of this is that, while the risks to families and their business are becoming more diverse, so too the measures that can be used to pre-empt and react to these risks are becoming more sophisticated and greater in number. The key is to be prepared, have ready access to the appropriate range of expertise and implement a variety of tools to address the particular threats in play and secure the best outcome.
Tom is an associate in the Farrer & Co reputation management and disputes team. Having trained at the firm, he qualified into the department in September 2013. Tom advises clients on all aspects of reputation and risk management, such as adverse media coverage, online reputation management, crisis planning and cyber security issues. Key areas of law on which Tom advises include defamation, privacy, data protection, harassment, blackmail and intellectual property disputes. He has acted for a broad spectrum of clients, ranging from high net worth individuals and family businesses, to corporates, sports governing bodies and not for profit organisations (including charities, museums and galleries), to financial services firms and educational institutions.