The Fake News Threat for Financial Institutions – How to save your bank (or any other kind of firm)

Fake news is a powerful instrument to influence elections, stir anti-immigrant sentiment or drive share prices up and down. Especially in financial markets information is central to the direction prices of securities move and well-placed misinformation or fake news can have disastrous consequences.

 

So, who did he vote for then?

 

When the Pope endorsed Donald Trump for President close to a million people shared the fake story on Facebook. When news broke that $375k were deposited in the Kazoo Khan law firm (the owner of the law firm spoke at the Democratic National Convention critising Trump heavily) by the Clinton Foundation, it was shared over 260,000 times, while the document, a Wells Fargo bank letter, was a forgery. A fake news article claiming that Hillary Clinton had sold weapons to ISIS, which was supposedly confirmed by Wikileaks was shared almost 800,000 times on Facebook. The debate about fake news seems to be at an all time high and with crucial elections around the corner in France and Germany fear is rising that these could be subject to coordinated smear campaigns, too.

Old Wine in New Skins?

But mass media has been used for a long time for to distribute propaganda and false information, so fake news isn’t a new phenomenon. What is new though it the way news gets distributed in this digital age: where in the past news stories were published by journalists who provided a layer against misinformation, nowadays everyone can find an audience through social media channels. While serious journalists would always check their facts, producers of fake news rather use the tactics of the tabloid press relying on the elements of surprise, exaggeration, scandalising and feigned indignation.

While news in elections like have a longer lifecycle (but are not necessarily less hazardous), information in financial markets can have an immediate effect, for instance, on the share price of a company.

Fake news can be a profitable business, either by generating advertising revenue by creating or driving traffic to a web site or as an ‘employee’ of such websites or public institutions. For instance, a recent report claimed the Kremlin had alone hired 1,000 people to create anti-Clinton ‘fake news’ in key US states during election. However, the sums made in such operations are only marginal when compared to the secondary impact of such measures. Leaving aside the political value of the outcome of an election, it is very profitable for the winner of it. But returning to the initial problem for financial markets, simply imagine the impact of false rumours on the value of the share price of a company. For example, almost ten years ago during the global financial crisis, trading in shares in the UK’s biggest mortgage lender, HBOS, was suspended for five minutes in early trading as its shares plunged almost 20% amid speculation it was facing a liquidity crisis and required a government bailout. While at the time it was contemplated that industry insiders had spread the rumours to profit from the price drop. Ten years ago that may have required access to a certain network within the industry but with the increased use of social media by financial institutions itself as well, the group of people starting and benefiting from fake news has grown significantly. Also, while in most cases fake news are simply in text form, the progress in audio and video technology means that it is only a question of time until it will be fairly easy and common to use these instruments to create even more convincing fabrications. But you don’t need to go to such extreme cases to understand the risk your company may be at. Simply look at the use of social media channels by activist investors who use systematic campaigns to influence a company’s strategy or value by putting management under pressure through dedicated tweets, blog posts and even YouTube videos.

What you need to do

So, the threat is real and while Internet giants Google and Facebook have pledged to do more about fake news on their platforms, but there is only so much they can do and it will take time, too.

Adapt a digital mind-set: Whether you like it or not, digital has transformed business and communication. Firms need to be proactive about the image that they want to convey. Corporate blogs that contain great content and tell a compelling story are powerful tool to manage the information flow. Social Media channels should be used frequently to build trust by being transparent and authentic. If you ‘own’ the news, it works in two ways: firstly, users will revert to the outlets you consistently use to find out about the value of any news about your company and will make it more difficult to convince your audience with fake news; secondly, having a strong presence enables you to respond swiftly and effectively. Also, engage with the thought leaders of your sector. These are the people that influence the dialog surrounding subjects that concern your company and your audience is likely to turn to them to verify the value of a story.

Educate: Make sure your own staff about the risk of fake news by educate them regularly on the subject and advise them how to respond to the threat. This action can also be used in an adapted way to educate your audience: in times of mistrust and confusion, they might well be interested to hear from you about the risk of fake news and how to respond to it, further establishing your corporate website as the first port of call for relevant company news. To make sure a story is genuine, you should remind your staff to do a test along the following five points:

  • double check the information on other sources;
  • consider how reliable the source is, i.e. is the information from a new website as opposed to one that has a reputation for reliable news;
  • check the background of the author and whether it is a reliable source in respect of the topic;
  • try to find out who’s behind the website, i.e. is there a reference to a team that can be checked, is the content copyright protected. A lack of this information is a red flag;
  • think about how the news fits in with prior knowledge and does it seem likely/realistic.

Protect your systems: When the Associated Press tweeted in April 2013 that saying the White House had been hit by two explosions and that Barack Obama was injured, it sent the US stock market into free fall and wiped of $130billion in stock value in a couple of minutes. We’re not saying that the AP used a poor password and in the wake of the incident Twitter itself had been criticised for its security procedures, which it has since improved, but make sure that like e-mail or other communication systems make sure that access to your social media channels had the same level of high protection.

Monitor communications: Be mindful of what’s happening around your company. There are many service providers that offer solutions based on automation and artificial intelligence that help you monitor anything relevant to your company and help you to respond immediately should you get in the line of fire.

The good news about fake news is that firms can take action by adopting a proactive approach alongside the suggestions made above. However, just sitting on the sidelines and hoping to dodge the bullet clearly by doing nothing isn’t an option anymore.