Bringing Order to Chaos: Classifying Social Risks

Situation: A company received loans from the Coronavirus Relief Paycheck Protection Program (PPP). Receiving PPP loans may create risk if the company did not comply with changing rules, appeared too large to qualify and/or must include the PPP liability in transactions. Corporate executives need to understand what could happen to their company’s reputation and brand.

To understand what might happen, the company could take past communications crises as examples, but how can they find relevant ones? Experts have a set group of “in-the-can” case studies, but “one size fits all” approaches can’t capture the complex issues that are often at work. Regular search (Google, etc.) doesn’t work either – if the firm searches enough of what’s important in the current situation to be meaningful, search engines will often only return “word salad” articles but nothing useful. Finally, let’s say the firm somehow acquires an unsorted list of the thousands of prior communications events that have occurred in history. To use it, someone would have to read about and understand them all and then decide which ones pertain to the company’s current situation.

Methodology: The company has access to a database that classifies social risk events into valuable categories. Instead of trying to prepare for a generic risk event, the firm and its advisors select important characteristics of the company’s unique situation to be matched to circumstances of other firms in the past, such as their industry, their corporate history, the current business environment, special circumstances (like the PPP loan), and the types of social risk exposures likely to impact the firm (diversity, etc.).

Here are some database categories that are helpful in describing communications crises and the circumstances in which they occur:

1.     Drivers of company exposure to risk events (BLM, #MeToo, and Covid-19).

2.     Industry of the firm as well as of key suppliers and customers.

3.     Vulnerabilities based on firm shortcomings (business model, CXO behavior).

4.     Activists protesting the firm (customers, employees, twitter activists).

5.     Reactions to corporate shortcomings (newspaper articles, boycotts, strikes).

6.     Responses of company to reaction (apology, investigation).

7.     Outcomes of the crisis (fines, lawsuits, executive dismissals).

 Solution: The company’s analysis of its own business coupled with the use of the social risk event database helps them find important examples from the past to guide their planning and preparation efforts. They study what worked for other companies and they prepare accordingly.

If you’re ready to go beyond guesswork when it comes to the future of your business, MSA can help. Our Social Risk Event database will provide you with insight that can help you understand and prepare for the biggest social risks your business faces today.