Shuttleworth said that while local banks' engagement on social media was providing value to customers, it was also a double-edged sword because it opened them up to potential reputational damage.
"In the world we are in, customer experiences can be shared real-time through Facebook, Twitter and the like, with no predictability on what will become a story or not," Shuttleworth said. "The majority of the risk ... is the reputational damage that could occur if [social media] campaigns don't go as planned."
He said banks had little control over "what goes viral" on social media.
ANZ, for example, faced a wave of criticism on Facebook last year over funding it had provided to a controversial Australian coal mine.
Read the report here:
The chief risk officer of an Australasian bank was quoted in the report as saying: "The fastest increasing risk revolves around a range of threats categorised as cyber-crime coupled with the broadcasting of the event through social media."
Shuttleworth, however, said Australasian banks had indicated they were well prepared to deal with social media slip-ups.
Meanwhile, regulation was the top-ranked risk for banks in Australasia and around the world, according to the report.
Shuttleworth said this showed regulations aimed at avoiding another global financial crisis were being seen as a burden.
"While it is clear regulation was needed, getting the right balance is important, especially once you overlay the cost of regulation," Shuttleworth said.
Australasian banks considered political interference the third-biggest risk they faced, the report said.
Top 10 risks facing Australasian banks
1. Regulation
2. Pricing of risk
3. Political interference
4. Macro-economic environment
5. Sales and business practices
6. Technology risk
7. Social media
8. Shadow banking
9. Interest rate markets
10. Emerging markets
Source: Banking Banana Skins 2014.
