Business has finally woken up to the potential benefits and real threats posed by the rapid expansion of social networking. From being a development that business viewed as something to be feared and policed during working hours, CIOs now see social networking as a legitimate business tool with tangible benefits as well as risks.

Advertising campaigns often include an element of social networking and the community aspects of social networking can be used to engender loyalty to a company or product, to gain valuable consumer feedback or generate new ideas for products.

However, as social networking becomes embedded within businesses, so the risks increase. At the heart of social networking is spontaneous user-generated content, but with unregulated content comes the risks of defamation, copyright infringement and damage to corporate reputation. Social networks do not accept legal responsibility for content on their sites, so if you're considering creating a page on Facebook, you will need to moderate it yourself.

But while you can exercise some control over your branded pages, the greater risk comes from content posted elsewhere. Eurostar discovered this the hard way in December 2009 when trains were stuck in the Channel Tunnel by the "wrong kind of snow", leading to days of suspended services. While Eurostar's own communication channel failed to provide up-to-date information, passengers found that the most reliable information came from Twitter and Facebook. People on the stranded trains were tweeting angry comments about their experience and this quickly led to a new group on Facebook called 'We hate Eurostar'.

So what could Eurostar have done differently? Well, it was quite clear from the start that Eurostar didn't have a proper social media strategy. Had it realised the power of social media, Eurostar could have used social networking channels to put across its message and deal directly with the anger being generated. Being reactive is always harder than trying to set the agenda.

A similar pattern emerged this April over the volcanic ash travel chaos when airlines, trains and ferries found that their websites were being contradicted by tweets and passengers relied on Twitter instead.

Since social networking is here to stay, businesses should ride this wave rather than trying to ignore it.

About the author

David Skinner is a partner in law firm Morrison & Foerster's Global Sourcing Group