Lessons for entrepreneurs from the Facebook scandal
Facebook CEO Mark Zuckerberg testifies during a US House Committee on Energy and Commerce hearing over Facebook’s data breaches in Washington, DC, last week. PHOTO | AFP
Competitors can take advantage of the scandal to come up with new social media sites that guarantee data privacy.
Last week the US Congress questioned Facebook founder Mark Zuckerberg over data protection and privacy issues following the Cambridge Analytica scandal.
A colleague who watched the proceedings argued that Mr Zuckerberg’s presentations were wanting as he seemed ill-prepared and dodged lots of tough questions.
Every Goliath has a weakness and in FB’s case, the Cambridge Analytica scandal exposed its vulnerability. Innovators and techpreneurs can learn from the FB scandal on the risks inherent in running a similar kind of business.
The FB scandal presents a case study for businesses in similar sectors. The scandal can also present an opportunity for new businesses to spring up.
Competitors can take advantage of the scandal to come up with new social media sites that guarantee data privacy.
This is opportune time for other social media sites to bridge the competitive gap between them and the global giant by taking advantage of the exposed weaknesses and offer better services. The scandal will be a good case study in risk management.
FB operates in a legal environment that includes data protection laws in several jurisdictions around the world. The firm risked flouting data privacy laws and being legally non-compliant.
The manner in which the scandal was handled seemed to fall below expectation for a global giant such as FB. If one doesn’t properly manage risks then they end up engaging in crisis management, which is not good for the organisation.
FB’s share price fell towards the end of last month due to the scandal, leading to a $5 billion (Sh500bn) loss.
The image of FB as a secure social media site has been affected and indeed a number of corporations have closed their accounts in protest. Also, FB shareholder have sued the board for breach of their fiduciary duty for failure to disclose the Cambridge Analytica data breaches.
In addition, some FB users plan to sue the global giant for breach of their privacy. FB’s non-compliance with privacy laws in several jurisdictions exposed it to a number of legal actions including closure, therefore affecting profitability among other issues. Innovators and techpreneurs can learn a number of issues from the FB scandal.
One is that before undertaking a venture, consult a lawyer to assist you in preparing a legal compliance check list to ensure that it is compliant.
Non-compliance can kill your business and expose you to huge losses. It is important to conduct due diligence before embarking on a venture.
A due diligence is an appreciation of the legal risks and opportunities involved in your venture.
Also, put in place a risk management policy and strategy. While it is not possible to highlight all the risks a business may be exposed to, it is important to understand them and put in place mitigating strategies.
A well-managed risk could be an opportunity for growth. Risks can also present an opportunity for rebranding.
Fore example, a recent fire in Kijiji slums, Nairobi, caused an uproar. But the county government swiftly assisted affected residents by setting up helplines, making financial donations and helping the residents rebuild their homes. This was good risk management.
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