Risk is now centre stage in every corporate boardroom thanks to the global financial crisis. However, BP’s experience with the devastating oil spill in the United States brings into sharper focus the need to effectively manage brand and reputation, especially in the dynamic sphere of social media.

There is no doubt that social media has the ability to harness and magnify community outrage about corporations. BP has felt the full force of global frustration and anger about the catastrophe.

The full spectrum of social media platforms have condemned BP’s failure to manage the unfolding crisis and the company’s approach to online advertising to protect its brand and image.

With hundreds and thousands of Twitter users following a satirical Twitter account ‘@BPGlobalPR’ engaging in lampooning the company and successfully rebranding BP – Beyond Pollution. While on Facebook over half a million members have joined “Boycott BP”, with members posting three comments about the beleaguered corporate every minute, the Facebook page also contains GoogleMaps to non-BP petrol stations.

To help repair the brand damage on social media and internet more broadly, BP has been forced to purchase targeted advertising on Google to help direct the public to its sanitized corporate web presence.

While the jury is out on BP’s ability to manage the impact of the crisis on its business and reputation, the jury has found that managing social media must be on every CEO’s radar to ensure the long term survival and sustainability of brands, businesses and institutions.

So what is the lesson for CEO’s and risk managers? What are the linkages between social media and risk management?

A 2010 survey of Australian and Asia-Pacific top 500 corporate and public sector organisations by Aon, listed damage to “brand and image” as the number one concern facing business for the third year in a row.

This risk is heightened by the increasing level of engagement and involvement of every demographic across social media. It is no longer limited to teens, with over 55’s recording the fastest growth amongst Australia’s 8.8 million Facebook users.

CEO’s and Public Relations practitioners need to recognise the power of social media in shaping the reputation of businesses.

Online activists now effectively harness social media to build and chorale support to undermine business brand and reputation of companies perceived to be unethical and untrustworthy.

Social media is much more than ‘marketing’ so perhaps organisations should take the lead from their Risk Managers, who have put damage to brand and image as their number one concern, and consider where social media fits into communications the mix.

James is chief executive of online reputation management group SR7, which runs audits, monitors and manages social media for organisations.