How FRMs Mitigate Social Risk to Fuel Business Success

by Miles Education Make an impact. Lead,Excel, Serve

Companies have traditionally worked on a target market approach to become adequately due diligent. But this has changed today as companies started producing goods and services in one country and selling to another. Since this process is under public scrutiny, many companies face reputational problems and social risks. So, what is the social risk? Social risk is a negative perception of the negative impacts of the company on society. Social risk is connected with the company’s operations, geography, and sector that may breed in environmental risk, human health, safety and security, biodiversity, and cultural heritage. Huff, what do we do now? A strategic financial risk manager would be a better solution to move forward, but do we know how he/she clears the air? Given the broad nature of social risk, let’s look at some critical strategies that an FRM professional leverages to bring down social risk.

Company Core Goals

A well-defined set of policies, goals, and regulations can help companies respond to social risks much faster. Risk managers need to collaborate with the management team, HR, and C-suite level to ensure that their goals are complying with social values and align with the ethical standards of the government to avoid any reaction or negative objections from the public in the future. Establishing a chain of command of policies and goals can equip the company to efficiently respond to the social risk and guard its reputation while fueling organizational success and growth.

Stakeholder Diversity

Financial Risk Managers need to build a stakeholder community that is more diverse and has a role in different sectors of the economy to avoid any social risk. An organization’s operations and reputation are critical for its progress and success, hence risk analysts need to strategically decide the company’s activities and engagement involves diverse partners and stakeholders like government agencies, environmental groups, education institutions, investor groups, NGOs, human rights groups, trade unions, etc. Having diverse stakeholders will help you to face social risk without much pressure.

Media Relations

Perceptions are one of the bottom-line reasons behind social risk and negative perceptions are easy to unearth against the company’s reputation and goals if regular and consistent communication is not maintained with the media or press. To overcome this challenge, financial risk management teams try to make cordial connections with the media and press so that there is a regular flow of information about the company, its projects, products, and initiatives that are compliant with government, legal, environmental, and social standards. Since news spreads through various platforms, mostly social media, it can easily damage the reputation and brand of the company if misconceived ideas and information is spread, but this can be arrested if financial risk managers have a strong communication nexus with proactive PR teams within organizations.

Review Panel

While laying out social risk strategies, risk management should keep in the loop the human resource, c-suite leaders, and other managers and stakeholders for consensus to avoid any pitfalls and build credibility in the execution of policies, norms, and standards. Risk analysts need to listen to diverse opinions rather than tell their story to the management so as to avoid any dissent or dissatisfaction. This can help you source honest opinions and views to build stronger social risk strategies for the company.

Humanity

Social risk is driven by the emotions of society and hence must be respected and considered by companies and organizations. And no mitigation plan is free from bias and opposition and companies are subject to consumer boycotts and negative outcomes, hence FRM professionals by harping on accommodating values can overcome social risks. Hence you need to address this risk from a systemic perspective, not an event-by-event basis.