How do companies cope with social risk? In “Blindsided by Social Risk—How Do Companies Survive a Storm of Their Own Making?” from the Rock Center for Corporate Governance at Stanford, the authors look at “social risk,” essentially, reputational risk that can impair a company’s social capital and, in some cases, its performance. These risks can arise from a variety of circumstances—a damaging statement or action by a company representative (a CEO, a board member, an employee) that triggers an adverse reaction from customers, employees, regulators or the public; a troubling interaction with a company’s services or a product name considered offensive; a damaging event at a competitor that fuels a broader inquiry across the industry. In these types of cases, “media attention (social or traditional) amplifies the impact, sparking a backlash that extends well beyond the directly affected parties.” Because social risks can be more nebulous and unpredictable than...
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