The discipline of risk management in the corporate sector has strong origins that date back more than a century. Companies' and organizations' ability to successfully address and reduce risks, including those of a financial, legal, and operational nature, has improved as well. However, in today's corporate context, a different and more complex type of risk has evolved, posing unique difficulties to organizations: social risk.
Social risk is a relatively new term that represents a dynamic and multidimensional problem for modern businesses. It is described as the susceptibility to negative outcomes as a result of a nexus of population-based activities and the often erratic tides of public perception. This type of risk is not only a product of a company's internal workings, but is deeply connected with external elements, frequently manifesting as a reflection of what happens in the world around us. One of the distinguishing features of social risk is its inherent link to society's collective beliefs, emotions, fears, and anxieties. It is a risk category that is shaped by the dynamic interaction of cultural, political, and social variables. Due to its dynamic nature, it is intrinsically difficult to foresee, quantify, and control, distinguishing it from more traditional forms of risk that can be properly assessed and managed.
Social risk can have a wide range of negative repercussions for companies. Negative public impression, whether justified or not, can harm a company's reputation, hurting brand loyalty and, as a result, financial performance. Social risk can present itself in a variety of ways, ranging from public outrage and boycotts to legal and regulatory issues, resulting in a volatile climate that necessitates innovative approaches to risk management.
For instance, BlackBerry's collapse is a multidimensional story that incorporates social risk as a contributing component. While it is crucial to emphasize that BlackBerry faced a variety of obstacles, including technological and strategic issues, unfavorable public opinion and societal shifts all contributed to the company's demise. BlackBerry continued to prioritize physical keyboards and security features while customer preferences switched toward touchscreen smartphones with extensive app ecosystems. BlackBerry's collapse was exacerbated by this misalignment with growing consumer trends.
Entrepreneurs and organizations must recognize the need of taking a proactive approach to social risk management. This includes not only detecting potential sources of social risk, but also actively participating in industry-related conversations and issues. Companies can create resilience and improve their ability to weather social risks by remaining aware of societal shifts and adopting responsible steps to address issues.
Adaptability and agility are critical in the face of the unpredictability of social risk. Entrepreneurs and businesses must be prepared to quickly modify their strategy and operations in reaction to changing social dynamics. Flexibility and a readiness to shift course in the face of unanticipated problems are critical components of good social risk management.