BTL 816 - Social Risk

 

The Banking Tutor’s Lessons

BTL 816                                                                   21-08-2025

Social Risk 

Social risk refers to the potential negative consequences that can arise from a company's operations or interactions with society. These consequences can impact various stakeholders, including employees, customers, communities, and the environment, leading to reputational damage, financial losses, or operational disruptions. 

Key Aspects of Social Risk: 

Stakeholder Perceptions: Social risk is often linked to how stakeholders perceive a company's actions and their impact on society. 

Social Vulnerability: Underlying social conditions can make individuals and communities more susceptible to harm from external factors, creating social vulnerability. 

Social Value: Social value refers to the positive impact a company has on society, while social risk is the potential for negative consequences. 

Examples: Social risks can include environmental pollution, human rights violations, impacts on local communities, and unfair labour practices. 

Management: Social risk management involves identifying, assessing, and mitigating potential negative impacts to protect a company's reputation, operations, and financial performance. 

Social Risk Management Strategies: 

Prevention: Implementing measures to avoid social risks from occurring in the first place. 

Mitigation: Reducing the severity of social risks if they do occur. 

Coping: Developing strategies to deal with the consequences of social risks. 

Integration with ERM: Incorporating social risks into a company's overall Enterprise Risk Management (ERM) framework. 

Stakeholder Engagement: Actively engaging with stakeholders to understand their concerns and expectations. 

In essence, social risk is about understanding how a company's actions can affect society and taking proactive steps to minimize harm and maximize positive impact. 

Sekhar Pariti

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