Societal risk recognised as associated to Political risk
In a recent FT article of Alyson Warhurst with the title "Respect risk and reap the benefits" the author focuses in the societal origins of political risks as this site so explicitly puts regularly to the front.
As referred by the author "Corporate longevity is a function of how companies navigate risk — political and financial. Traditionally, political risk is about threats that are considered outside the control of businesses, such as regime change, terrorism and nationalisation. But the concept is broader: today’s political risk encompasses societal risk. Seen this way, it becomes predictable and thus manageable". This becomes more and more obvious for business leaders operating in countries with heavy social and political imbalances.
"Business needs to address these problems in its own operating environment. For example, if there is a flood or a spike in food prices, successful businesses have shown it is better to feed employees than lose working days. That may sound radical, but it is what mining and oil and gas companies with long histories in high-risk countries have done for years — investing in schools and roads, buying regionally and employing locally. They know that, in the long term, they are part of the societies in which they operate.
Where governments are weak, preoccupied or failing, business has a greater social responsibility. Political risk is too unpredictable to leave to chance and too costly to address after the event — as illustrated by Egypt, where many global companies were caught unawares.
The most sustainable businesses are those that recognise and take seriously societal risk and corporate social responsibility. They have built up teams of social and political scientists who can analyse and navigate the danger areas. Corporate longevity is about anticipating political risk and resilience. That comes through understanding and managing the societal risks that are its causes and consequences."
The challenge is that these risks are not what traditionally companies where estimating as such so they have to address other people, follow other practices as a response to these risks and allow themselves a different state of mind while addressing these issues.