Social Risk and the management of MNCs: From Risk Society to International Business Management

Multinational companies (MNCs) are increasing being exposed to risk that originate from local communities in the business environment where they operate. The response has been to implement systems for stakeholder engagement by including social issues into their risk management systems. However, these seem to be ineffective in mitigating local community grievances. In this paper I argue that social risk is to be defined in terms of how local stakeholders construct reality through a sensemaking and framing process which constitute at risk by its combined capability to influence organisational value creating activities. By utilizing a cross-disciplinary approach founded in a sociological conceptualization of risk I show that there is an alternative to identification and mitigation of social risk. I propose that MNCs could improve their performance by organizing their efforts using “intelligent” systems, which are based on the capability to identify frames and sensemaking processes. This paper show how social risk management can be conventionalised using distinct theoretical domains taking its outset in a sociological perspective on risk, linking International Business (IB) risk management practices, operationalised through Corporate Social Responsibility (CSR) systems, with communication theory and risk as frames of meaning constructed by community members and corporate decision makers.