Enterprise risk management for the organization’s social activities

Businesses face inherent and unforeseen risks. The only thing founders can do is predict potential challenges, make financial, human, and planning preparations, and know how to seize opportunities as they arise. The aforementioned activities are part of enterprise risk management for typical firms and are now overused. But are these practices used similarly in social organizations or social enterprises, and are the outcomes what were anticipated? Let’s learn by reading the stuff that follows in this post.

What is a Social Enterprise?

Business activities exist in many forms of business organization such as private companies, limited liability companies, joint stock companies, etc. In general, these businesses always achieve their goals of maximizing profits achieved by providing products and services to customers. However, there is another type of enterprise that needs to be mentioned: Social Enterprises. This type of Enterprise is still quite new and unknown, but according to the Research Report “Social Enterprise in Vietnam”, there are still about 200 organizations operating in this form.

Social enterprises operate with the goal of solving problems in the community and living environment

According to Enterprise Law 2020, Social Enterprises are essentially a type of organization that operates with the goal of resolving a problem in the community or the surrounding environment rather than operating to maximize profits meet social objectives. The distinguishing feature of Social Enterprises is that they generate cash from production and business while striving to promote social ideals like raising awareness of the environment, the negative effects of stimulants, etc.; Having a crystal-clear statement at the start, prioritizing social aims.

Differences in risk management between profit and non-profit enterprises

Profit and non-profit businesses have important differences in risk management. For-profit businesses face broad and comprehensive risks such as financial fluctuations, consumer trends, competition and legal regulations. Meanwhile, non-profit Enterprises focus on social, environmental and ethical issues. Risk concerns, priority levels and risk assessment methods are also different. Non-profit businesses that care about local communities, follow rules and use a performance-based risk assessment approach, minimize harm to the community and ensure sustainability.

Why do Social Enterprises also need risk management?

Enterprise risk management is necessary to solve problems arising from functional departments

Social Enterprises still need risk management because it shows the urgency in the operating process. It’s easy to imagine, even though it doesn’t aim at profit, this type of Enterprise is still considered a business organization with similar functional activities such as human resources recruitment, administration, marketing, developing operational plans and maintaining development.

Because this business will have to deal with risks that result from the aforementioned functions, establishing a risk management approach is essential. On the other hand, the advantage of this is that it can make an impression and foster confidence with the sponsor to assist sustain financial resources because it demonstrates the project’s seriousness and dedication to completion. aims to help the community and society. Risk management for Social Enterprises is crucial and useful as a result.

Risks that Social Enterprises may encounter

Uncertain target orientation

The first risk is that the Enterprise has chosen a problem to solve that is too extensive and cannot be done in a short time or is too vague. This can be seen as a risk that will have a serious impact on future operations when the initial orientation is deviated from which problems will still not be resolved with the time and effort spent.

The project has been suspended or cannot be finished.

The implementation of project progress depends greatly on the management capacity of the head of the enterprise. The concept of Social Enterprises has only developed in the past 10 years and the number is still quite limited, so the operating experience of these Enterprises is still young. Unclear direction, overlapping tasks or too high goals make it difficult for the project to be achieved within the allowed time. This is considered a management risk when the finished product cannot be used or adjustment makes organizational activities stagnant and ineffective.

Young management experience makes it difficult for the founders to steer the project to achieve its goals

Lack of human resources

With the goal of using profits to serve society and the community, Social Enterprises often operate with employees acting as collaborators and volunteers. However, this carries human risks due to fluctuations and instability in the number of personnel. In addition, social, environmental, and community issues require specialized human resources and investment in solutions. However, this human resource can only participate in a consulting role because they still have to work during working hours. Therefore, human resource issues should be considered an important risk because people are the ultimate determinant of success.

Compete with other ideas

Another risk in Social Enterprises is the competitive factor. Although it is not necessary to care about sales market share, Social Enterprises must care about the influence and spread of their images and activities to the community. For social enterprises that choose fields such as environmental pollution, education and life, they need to develop creative ideas and solutions to differentiate themselves from other social organizations. If their activities are similar, the popularity and recognition from the community will not be high, because these are only existing solutions without innovation consistent with current reality and trends.

Risk management for Social Enterprises

Once they understand the risks for Social Enterprises, the next step they need to take is not to address each risk but to focus on a comprehensive level of risk management. The goal of this is to ensure the position, image as well as maintain the existence of the organization in the long term. Management will include three activities: learn, prepare and get ready

Learn the risk concepts of Social Enterprise

Identification, distinction, and evaluation of potential dangers are all part of the investigation process. The risks outlined within the context of this paper still have numerous flaws. In order to grasp the issues, businesses themselves must willingly investigate and analyze related situations that social companies have faced in the past. From there, the founder will have a fundamental grasp of running a community-focused organization in a reliable and confident manner in the face of occurrences and incidents.

Prepare for the reaction work

Social Enterprises should always plan detailed work on identifying, evaluating and analyzing risks

After you have acquired a certain amount of knowledge, the next step is to plan and estimate appropriate solutions in terms of finance, tools, and necessary resources. More detailed work will include risk identification, priority assessment, risk analysis and finally measures and monitoring. When these tasks are fully performed, the enterprise has prepared itself to be ready to respond. 

The spirit is ready and receptive

With a lot of knowledge and careful preparation, at this time, Social Enterprises have a confident spirit to face. Even though risks may be unexpected, with understanding, businesses can calmly react, easily overcome difficulties and have their own lessons for the organization’s development process position. These valuable experiences are a further step in preparing for future risky situations and businesses can share them as practical lessons with the community and other organizations.

Once you have complete knowledge and plans, businesses should confidently and calmly face it

Summary

The objective of Social Enterprises is to promote social values rather than huge profits. Although the objectives could be slightly different, Enterprises risk management is a crucial task to keep sponsorship and business operations in the market so that good news can keep getting out to the community. With the help of this page, administrators, founders, or others looking to start a social enterprise should be able to obtain relevant information to serve as a guide.