Tag: social risk

How do companies cope with social risk?

How do companies cope with social risk? In “Blindsided by Social Risk—How Do Companies Survive a Storm of Their Own Making?” from the Rock Center for Corporate Governance at Stanford, the authors look at “social  risk,” essentially, reputational risk that can impair a company’s social capital and, in some cases, its performance.  These risks can arise from a variety of circumstances—a damaging statement or action by a company representative (a CEO, a board member, an employee) that triggers an adverse reaction from customers, employees, regulators or the public; a troubling interaction with a company’s services or a product name considered offensive; a damaging event at a competitor that fuels a broader inquiry across the industry. In these types of cases, “media attention (social or traditional) amplifies the impact, sparking a backlash that extends well beyond the directly affected parties.” Because social risks can be more nebulous and unpredictable than traditional operating or financial risks—and the extent of potential damage more difficult to gauge—companies may find it especially challenging to anticipate, prepare for and guard against them.  Yet, the paper asserts, “so called ‘social risk’ can be just as material as any operating, financial, or strategic disruption.”  What can companies and boards do to protect against these types of risk events or mitigate their impact?