Assessing social condition

  • The banking royal commission demonstrated that financial institutions have failed to manage their relationships with society and the associated risks — their ‘social condition’.
  • The result has been reputational damage and loss of social capital.
  • Organisations would benefit from an annual ‘social condition report’ which examines the state of relationships with all stakeholder groups.

Adult and child's hands cradling a blue paper house

A recent Actuaries Institute paper by Ian Laughlin (former deputy chair at APRA) and Hadyn Bernau (Principal, Finity Consulting) contends that the success and sustainability of an organisation depend at least as much on its ‘social condition’ as its financial condition. They observe that the effort spent on analysing and managing social capital is typically far less than the effort relating to financial capital, and attention is often given to relationship issues only after the fact.

The authors say organisations should introduce an annual social condition report which examines the state of relationships with all stakeholder groups. They believe that a deeper understanding of social condition will help to pre-empt the sort of problems exposed by the royal commission and the APRA report into the CBA.

This article summarises Laughlin and Bernau's ideas and considers the case for a social condition report. The Actuaries Institute paper focuses on financial services organisations, but the authors say their ideas are applicable to many types of business.

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