Insights

Disinformation is not a new phenomenon but recent changes in technology have led to increased proliferation (through social media networks, compounded by botnets) and more challenging discernment (such as deepfake videos that look highly authentic). The reputational risk faced due to disinformation is now compounded and here are elements of how this manifests. Some examples of how disinformation can lead to a negative financial impact for private enterprise. Costs of disinformation can also have substantive negative social impacts, and therefore civil society and governments also have incentives to rebutt this.

Reduced sales

Disinformation about products/services can reduce demand. E.g. if disinformation is spread about safety standards for a car, consumers may be more nervous about purchasing it. Moreover, if disinformation is spread about a company's reputation, e.g. if it has illegal labour practices, consumers may choose to boycott it, further reducing sales. 

Fall in price customers are willing to pay 

Examples of the disinformation above all reduce demand. This demand may not just be reflected in fewer sales but possibly in willingness to pay. If there is disinformation about the lifecycle of a laptop, and it is widely believed to be 24 months, as opposed to 3+ years, willingness to pay for this durability  may be lower.

Increased cost of production (e.g. employee morale or shortage of applicants)

Disinformation can affect costs as well as revenue. External input costs are more likely to be fixed, but a drop in employee morale or an inability to attract talent can reduce productivity and increase personnel costs per unit output. Disinformation affecting reputational risk, e.g. about working conditions  can make an employer less attractive leading to increased attrition and cost of hiring, compounded with the possibility of attracting less capable candidates with lower levels of productivity

Increased cost of capital 

Disinformation can also affect the cost of capital and even the accessbility of capital, especially given that investors/lenders often move in herds, and perceived risk can impact the cost of lending. Disinformation on elements such as future financial outlooks can lead to credit facilities drying up, sparking liquidity crises that may only be solved with loans from lenders at a substantive premium.

What can be done?

It's clear that information threats pose substantial commercial risk, across costs, revenue and access to finance. However, there are ways in which information and reputational risk can be managed, and Say No to Disinfo (SNTD) can help with each of these.