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​​Truth Is, Fake News Has Always Been a Risk

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Misleading or patently false information has long been a risk for organizations. A disparaging comment, even one with little or no foundation in fact, can leave executives scrambling for a response that will contain and, hopefully, reverse any damage. Usually, the truth will prevail.

But as we are seeing more and more, an unceasing barrage of unsubstantiated and outright phony "news stories" powered by social media and biased websites can quickly overwhelm an organization and influence events.

That's why it was no surprise to me when Google's parent company, Alphabet, recently elevated objectionable content — specifically, content spreading across the internet and social media — as a key risk. Alphabet's concern, of course, regards the integrity of its own brands, but the risk applies to any organization and, indeed, any individual.

"Our brands may be negatively impacted by a number of factors, including, among others, reputational issues, third-party content shared on our platforms, data privacy issues and developments, and product or technical performance failures," Alphabet stated in its annual report, or 10-K, to the U.S. Securities and Exchange Commission. "If we fail to appropriately respond to the sharing of objectionable content on our services or objectionable practices by advertisers, or to otherwise adequately address user concerns, our users may lose confidence in our brands."

Did this risk just occur to executives at Alphabet? I highly doubt that. What's different, I believe, is the company's risk appetite.

The recent backlash against questionable content bombarding consumers of Alphabet's YouTube and Google, as well as Facebook and Twitter, are clearly driving the change.

Frankly, the company's description of risk might be considered by some as pretty mild. It doesn't warn of the societal dangers of objectionable content, but of the risk of losing advertisers and users of its services if it fails to respond appropriately. It also doesn't address an erosion of public confidence in legitimate media posed by questionable reports masquerading as news; rather, it focuses on "third parties" that are exploiting Alphabet's brands to spread the false information.

Striking a balance between a free flow of information, even if it's titillating or scandalous, and acting responsibly as a reliable and credible conduit for such "news" is nothing new. Organizations, including mainstream media, have played that game for centuries.

The lesson for internal auditors is that we must be attuned to our organization's risk appetite and offer warnings when the risks change. This may be what is driving the change in tone from Alphabet.

Speaking at The IIA's 2016 General Audit Management conference, Google's chief audit executive said the organization's internal audit function is practically built on that premise: "Our mission is to provide an objective view of all the risk they need to consider in making their decisions. Our responsibility is to help management have full information to make good risk-based decisions."

Ultimately, it is up to management and the board to set the risk appetite, but it falls on internal audit to make sure the risk portfolio is accurately reported all the way to the top. In Alphabet's case, I'm confident management and the board are fully aware of the undercurrents of information dissemination, and that they will continue to adjust their risk appetite to fit those changing dynamics.

In pondering the very real risk of fake news, I am reminded of the story of a famous radio broadcast in 1938. Orson Welles, an American actor, writer, director, and producer, "interrupted" CBS radio programming with breaking "news" that Martians had invaded Earth. He was actually reading from author H.G. Wells' science fiction novel,​ "The War of the Worlds." But his delivery was so compelling and so realistic that, for some listeners, it was also very believable and set off a panic. The iconic broadcast and the reaction of those who thought it was real have been part of lore for decades. Yet, a 2013 article cast doubt on the fact that the broadcast caused panic. So, now even the news about the fake news may be fake. We are living in interesting times.

As always, I look forward to your comments.

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