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The Economic Costs of Government Internet Interruptions

At the end of April, global internet access monitor group NetBlocks reported that Venezuela’s state-run internet provider ABA CANTV was restricting the country’s access to various social media platforms amid continuing demonstrations and political turmoil. In May, NetBlocks reports this has continued, in addition to similar internet limitations in Benin and Sri Lanka. While increased global internet connectivity has led to international economic growth, it has also often led to increased government control over methods of communication and commerce, and government shutdowns pose a serious risk to businesses and economic activity in these countries.

Businesses face a variety of challenges and risks when operating abroad, but internet shutdowns and limitations may present a unique impediment, especially for companies that operate largely online and rely on consistent internet access. With more countries shutting down or limiting access more frequently, companies that conduct business in countries with regular interruptions may need to plan accordingly, or reevaluate whether their operations can accommodate these disruptions. Companies that have internet-dependent supply chains may be particularly susceptible and should ensure they have comprehensive mitigation strategies in place to avoid business interruptions.

Many nations increasingly use internet and social media disruptions as a way to quell political dissent. Some countries have shut down social media after violent incidents, purportedly to curb people’s ability to incite further violence, such as in Sri Lanka after the Easter suicide bombing there. Ethiopia also limited internet access in 2017 after activists leaked copies of the national school exams online. Whatever a country’s motivation, the frequency of shutdowns worldwide is rising dramatically, according to Stastista, which notes a 6,000% increase between 2011 and 2018.

government internet shutdowns

The Indian government routinely implements shutdowns in various parts of the country, and has in turn suffered serious economic consequences. The Indian Council for Research on International Economic Relations recently reported that, between 2012 and 2017, internet shutdowns in India climbed from 3 to 70 per year, and the shutdowns’ total duration rose from 9 hours in 2012 to 8,141 hours in 2017. According to the report, titled The Anatomy of an Internet Blackout, these disruptions cost the Indian economy approximately $3.04 billion in total. This includes approximately $2.37 billion from mobile internet loss and $678.4 from fixed line internet shutdown.

The Brookings Institution released a study in October 2016 examining 81 short-term shutdowns in 19 countries and their impact on GDP. Between July 1, 2015, and June 30, 2016, the study found that the economic consequences of internet shutdowns cost at least $2.4 billion in GDP globally. The report notes that this is a conservative figure and does not account for tax losses or drops in investor, business, and consumer confidence.

Deloitte also examined the issue in 2016, estimating that the economic consequences of a temporary shutdown “grow larger as the level of connectivity and GDP increase.” For highly connected countries, a temporary shutdown could cut 1.9% of daily GDP—an estimated $141 million per day. Medium-connectivity countries lose an estimated 1% ($20 million) of daily GDP and low-connectivity countries could lose an estimated 0.4% ($3 million) of daily GDP.

A study released in October by Strathmore University’s Center forIntellectual Property and Information Technology Law (CIPIT) showed that shutdowns can also severely impact countries’ shadow economies, often uncounted in formal studies like those from Brookings and Deloitte. According to the report, titled Intentional Internet Disruptions in Africa, unreported economic activity in 49 African countries made up an average of 37.65% of all economic activity. Because this activity is not counted in previous formal studies (like the Brookings study), CIPIT estimates that including these shadow economies increases the total cost of shutdowns by 19% to 29%.

Another Statista study from August 2018 shows that certain countries are shutting down their internet more often than others, most notably India, Pakistan and Iraq. Risk managers should consider these figures and cost estimates when assessing their companies’ existing or potential operations in the countries noted below, or when looking at where to invest overseas.

Dealing with Reputation Risk

reputation risk and social media

Properly assessing risk is critical to any business. Successful businesspeople understand that every decision they make must be weighed against the potential risk to the company. This risk assessment must not be limited solely to situations directly related to the business itself, however. They must also consider reputation risk, or the risk events will have a negative impact on one’s personal reputation and, by extension, the business.

Whether fair or not, the decisions made in someone’s personal life can have a substantial impact on the company they are connected to. This risk extends beyond just the owner or executives of a company; employees caught doing unscrupulous things can cause a public relations nightmare for the business, ultimately resulting in massive losses for the company itself.

Assessing Reputation Risk

Unlike business transactions, where there are countless models and historical examples of the likely risk and reward of most given situations, reputation risk is far harder to quantify and prepare for. It is nearly impossible to predict, for example, whether or not an executive will get belligerently intoxicated and assault a police officer. The executive can bring unwelcome attention to the company, which in turn can cause investors, advertisers, and partners to shy away in the short or even long-term.

Exacerbated in the Social Media Generation

Social media platforms such as Facebook and Twitter have dramatically intensified reputation risks. In the past, it was possible for a relatively minor incident to be swept under the rug or forgotten relatively quickly. If not, chances were good that a story would stay relatively local, perhaps reported in an area newspaper once or twice before fading from memory.

Today, however, even a single story in a local newspaper (or, worse, an online blog) can be shared and re-shared thousands of times in a matter of hours. “Viral” stories can spread across an industry and the country within only a day or two. By the same token, an ill-advised Facebook or Twitter post on a controversial topic can be shared just as quickly.

Mitigating the Danger

Unfortunately, there is only so much one can do when trying to guard against reputational risk problems. It is impossible to control every human being’s actions, and even harder to control them every second of every day. The only viable solution is offering guidelines to employees and executives to try and minimize the problem as much as possible. It is also worth calculating risk factors among employees. For example, an employee with a history of public intoxication or domestic abuse issues may not be someone you want representing your company.

At the end of the day, there is only so much one can do to reduce reputation risk. It is important, however, to have a public relations strategy on hand for if and when a troublesome situation arises—and it almost certainly will at some point.

Avoiding Social Media’s Legal Pitfalls

Social media is now a standard communications tool for businesses, with many companies regularly using Facebook, Twitter and other social networks to engage with the public. More and more businesses are hiring social media specialists whose sole responsibility is to be the company’s “voice” on these platforms. But this activity comes with risk for both the organization and the individual. The potential for any posting to be retweeted, shared or even go viral underscores the need to be aware of the rising legal risks associated with your business’s social media accounts.

Potential Defamation Lawsuits

The first tip for anyone engaged in social media on behalf of their business or employer is obvious, but not always followed—think before you post. Even if the tweet or post contains an unintended error and is deleted immediately, postings can still be pulled and reposted or retweeted by others. Once something is out there on social media, however, you’ll need to deal with the consequences. Although the laws surrounding social media are still developing, it is possible for a business to be hit with an expensive defamation suit based on a single posting or comment.

Since most posts on social media pages are generally shorter than what a business normally has the space to say in a traditional publication, sales pitch or marketing brochure, the lack of context can present a greater risk of defaming someone or another business. Think about it like this: If a customer comments on a business’s Facebook page asking about one of their competitors, an employee might reply that the competitor provides “untrustworthy service” without much context or explanation to back up that claim. Just those two words have the potential to spiral into a defamation suit if the competitor feels the comment was untrue and harmed their reputation. Since most online statements are brief, it would be more difficult in court for the person posting the comment to prove that he or she is entitled to the same legal defenses available to a traditional publication, even if the post was true or was an opinion rather than a statement. To minimize defamation lawsuit potential, every comment, posting, tweet or retweet should be completely factual and have a positive tone. It is not always possible to check every post before it is published, but anything potentially controversial should be read by another pair of eyes before clicking ”submit.”

Personal versus Professional

Another still-developing area of social media regulation is the distinction between personal and professional profiles or accounts. Businesses are legally accountable for anything tweeted, blogged, or posted on the company’s social media accounts. But this is where it gets complicated; it is possible for a company to also be held responsible for what an employee posts on their personal accounts, especially if it’s not clear to the reader whether they are speaking on behalf of the company or only for themselves. Here’s an example: An employee who works in the food industry posts a photo to his Twitter account of himself handling food in an unsanitary way. Even though the employee may have meant it as a private joke for his followers, any customer who sees the photo could sue that business for lack of training and unsanitary conditions.

To proactively prevent this type of situation, it is important for employers to have a social media policy outlined in their employee handbook. Depending on the business and applicable law, it may also be beneficial to establish upfront that employees’ public social media accounts may be monitored. It is also worth considering a handbook policy stating that any work-related posts on an employee’s private social media accounts are not allowed, and the violation of this policy could result in termination. Some organizations require employees who have personal Twitter or Facebook accounts to post a disclaimer in their “about me” section saying something along the lines of, “I work for X Company, but all posts reflect my personal views only.” This can potentially protect both the employee and employer should a lawsuit arise, but it is not a failsafe.

The rise of social media is bringing significant benefits to businesses, but they also need to be aware of potential legal pitfalls. As the laws regulating social media continue to develop, smart business owners and managers should be prepared to implement appropriate safeguards and policies to ensure that their business can sustain a 140 character mishap, should one occur.

To protect themselves from any potential lawsuits, companies should have adequate insurance coverage in place to address social media activities. Since most commercial general liability policies do not cover online content, it’s important to truly understand what activities your policy covers.

 

Digital Presence May Improve Critical Customer Satisfaction for Insurers

With data from 15,000 customers and over 100 insurance executives, consulting firm Capgemini and Efma found that enhancing customer experiences directly impacted insurers’ profitability. “Given the increasing demand of internet and mobile channels in insurance, digital transformation is an effective approach to create positive experiences, secure customer loyalty, and ultimately improve insurers’ profitability,” the report states.

While many insurers say they are working to improve the user experience, ratings have only increased by about 2% worldwide, with only 32% saying they had positive experiences with their provider. Further, nearly 70% of customers reported that they are considering switching carriers. Digital presence is increasingly important in making customers happy, according to the study. For example, while internet-mobile is the least likely channel to offer a good experience, it has the greatest impact when successful.

Overall, as Capgemini and the MIT Center for Digital Business found in 2012, firms with a strong digital presence and customer focus are 26% more profitable.

In addition to the new report, Capgemini released the following infographic with their findings:

World Insurance Report 2014 Infographic