This post discusses social risk and social risk management, i.e. the management of social risks.

WHAT IS SOCIAL RISK?
Social risk is an interdisciplinary concept used with various meanings in the social and natural sciences. Social risk arises from negative perceptions of an organisation’s impact on the community. The social risks of a venture depend on the specific issues associated with an organisation’s operations, the industry sector and the geographic context.

Social risk is characterised by four components in combination: an issue, a stakeholder or group of stakeholders, a negative perception of an organisation, and the means to do damage. There is an increasing recognition that social risk factors – such as income, education, race and ethnicity, employment, community resources, and social support – play a significant role in health, business, politics and all aspects of human life.

Social risk for a business includes actions that affect the communities around them. Examples include labour issues, human rights violations within the workforce, and corruption by company officials. Companies with social risk problems face political backlash, public outcry, and a damaged legal standing and may need to be more sustainable in the long term.

UNDERSTANDING AND MITIGATING SOCIAL RISK
The practice of risk and crisis management has been embedded in the DNA of companies and enterprises for more than a century. Over time, companies have become quite comfortable with and capable of managing the risks they understand, whether financial, legal or operational. They also manage these risks if they become actual or perceived crises or disruptions. Organisations, however, increasingly face a newer form of social risk.

COMPONENTS OF SOCIAL RISK
The following components characterise social risk:
1. Issue: Societal and environmental issues are taking on heightened significance on a global level.
2. Stakeholder: For social risk, stakeholders are a broad group that includes any person or group interested in the issue.
3. Perception: Stakeholder perceptions are based on various information sources, including official news media, the Internet, word of mouth and the organisation itself.
4. Means: A stakeholder may possess various means to affect organisational conduct.

CHARACTERISTICS OF SOCIAL RISK
Research by social risk advisory firm ENODO Global and reputation and crisis management firm Kith identified five characteristics of social risk:
1. Human: Unlike traditional forms of risk that most often manifest themselves because of a discrete event or incident, the social risk is built on whom we are and shaped by our economic status, social mobility, community environment and mental health.
2. Dynamic: Social risk is formed by how people react to events and ideas; thus, it constantly evolves.
3. Dispersed: Social risk is an outgrowth of today’s connected society where nearly everyone can amplify their voice through technology and networks of family, friends, colleagues and social media followers.
4. Distinctive: Social risk is unique to each organisation. Because social risk forms as humans organically react to events and ideas, no two social risk events are alike.
5. Scalable: Social media platforms amplify public conversations and accelerate social risk, so they can quickly scale from an isolated idea or discussion into a broader movement.

SOCIAL RISK MANAGEMENT
Social risk management (SRM) is a conceptual framework developed by the World Bank. SRM focuses specifically on the poor, the most vulnerable to risk and more likely to suffer in the face of economic shocks. SRM aims to extend the traditional social protection framework to include prevention, mitigation, and coping strategies to protect basic livelihoods and promote risk-taking.

Through its strategies, SRM aims to reduce the vulnerability of the poor and encourage them to participate in riskier but higher-return activities to transition out of chronic poverty. SRM focuses on replacing unproductive coping strategies with advanced planning and mechanisms to help households anticipate and insure against shocks.

The main idea behind SRM is that all individuals, households and communities are vulnerable to multiple risks from different sources, whether they are natural (such as earthquakes, flooding and illness) or man-made (such as unemployment, environmental degradation and war). The recognition of the importance of risk management for the poor, the need for voice and empowerment, and the creative capacities and opportunities also form the centrepiece of the World Development Report of 2000 on poverty reduction.

SOCIAL RISK MANAGEMENT STRATEGIES
The existence and use of appropriate Social Risk Management (SRM) instruments to effectively and efficiently handle risk in its various forms. SRM strategies can be classified into three categories: preventive, mitigation and coping.

ELEMENTS OF SOCIAL RISK MANAGEMENT FRAMEWORK
The main elements of the social risk management framework consist of the following:
1. Risk management strategies, including risk reduction, mitigation and coping;
2. Risk management arrangements based on the level of formality, including informal, market-based, and publicly provided or mandated, and
3. Actors in risk management including individuals, households, communities, NGOs, market institutions, government, international organisations and the world community at large.

NEW APPROACH TO SOCIAL RISK MANAGEMENT
Social risk is too pervasive and diverse for any company, political institution or leader to stop. Companies must be cautious in relying on the traditional crisis playbook of “Acknowledge, Apologies, Act,” where they seek to make amends to the audiences most impacted by the incident or chain of events. Social risk is too broad for that.