How often do you search your business online to monitor what’s being said about your company? Checking often can help you identify negative coverage early, address inaccuracies, and respond to misleading or false information before it causes harm.
Investors, lenders, customers, vendors, and potential business partners frequently search a company’s online presence before deciding if they want to work with them. While this may seem intrusive, conducting these types of adverse media screenings (which flag reports of alleged unethical or illegal behavior) is both common and advisable. It can safeguard a business from payment risks, fraudulent actors, and unnecessary legal disputes.
Formal policy
Given the vast amount of data available online and the potential legal risks, conducting adverse media screening requires a careful, methodical approach. Start by developing a formal policy to guide you.
The policy should assist you in finding and using adverse media without triggering legal exposure. Among other things, it should identify sources you intend to access, clarify off-limit actions and detail how you plan to use any negative information you’ve found. Because laws governing privacy, defamation, and discrimination can vary by jurisdiction and situation, ask your attorney to review the policy before rolling it out.
Reliable data
Adverse media screening can cover a broad range of activities. So you should create categories to consistently classify potential red flags. Examples might include:
- Civil proceedings,
- Criminal misconduct,
- Environmental violations,
- Regulatory scrutiny, and
- Financial crimes.
Classifying data by category can help focus your due diligence efforts and make it easier to identify the most reliable sources for each.
Keep in mind that to generate traffic, some online outlets do little to verify the accuracy of their stories — and may even knowingly post disinformation. For example, many social media platforms allow their users to post opinions that may be factually incorrect. Rely only on information providers with high ethical standards and established histories of accurate reporting. And for any accusation, seek corroboration from multiple sources.
AI tools
You don’t have to conduct adverse media screening manually. Rather than asking employees to research and gather information, some businesses use software that relies on artificial intelligence (AI) to scan the internet. AI can analyze large volumes of data far more efficiently than manual methods.
However, buying such tools can require a substantial investment and may not be practical for smaller businesses. The scope of screening should be proportional to the size of your business, the nature of the relationships you’re evaluating and the level of risk involved.
Multistep process
However extensive your adverse media screening, remember that it’s only one part of a broader due diligence process. If you uncover something negative, ask your potential business partner to explain it. There may be an innocent — or at least, more nuanced — explanation. Also ask for references and follow up on them.
Adverse media screening can involve legal, operational and cost considerations, so work with your legal and financial advisors to determine when screening is warranted, how extensive it should be and how to control related costs. Contact your Rudler, PSC advisor for more information at 859-331-1717.
RUDLER, PSC CPAs and Business Advisors
This week's Rudler Review is presented by Heather Pillard, Senior Client Accounting Specialist and Karen Daugherty, CPA.
If you would like to discuss your particular situation, contact Heather or Karen at 859-331-1717.
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