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Social Risk Management: The World Bank’s Approach to Social Protection in a Globalising World

Author: R Holzmann, L Sherburne-Benz and E Tesliuc
Date: 2003
Size: 24 pages (8 MB)

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Summary

The World Bank’s rethinking of traditional Social Protection approaches has inspired a new conceptual framework named Social Risk Management (SRM). The focus of SRM is to replace unproductive coping strategies with advance planning and mechanisms to help households anticipate and insure against shocks. This requires redesigning traditional public interventions and substantial future work at the conceptual, empirical and policy level.

Social Protection (SP) is broadly understood as public measures to provide income security to the population. Until recently, few people considered SP important for improvements in economic and human development indicators. The new vision of SP sees it as a crucial ingredient of the twin development pillars; innovation and empowerment.

The fact that there is major mobility in and out of poverty suggests that concentrating on reducing vulnerability may be more effective than alleviating poverty. Whereas coping strategies are designed to relieve the impact of the risk once it has occurred, preventive strategies reduce the probability of the risk occurring. Mitigation strategies help individuals to reduce the impact of a future risk event through pooling assets and time. Access to Social Risk Management (SRM) instruments would allow the poor more risk-taking and thus provide them with an opportunity to gradually move out of poverty.

Providing risk management (RM) instruments to the poor is both an end as well as a means to development. The implications of the new SRM framework for managing risks include:

• The capacity to handle risk and the appropriate RM instruments depend on the sources, correlation, frequency and intensity of risks.
• Informal, market-based and publicly-provided RM mechanisms all have distinct comparative advantages. Formal social protection should not crowd out other arrangements.
• For the idiosyncratic risks, more reliance can be given to informal or market-based RM instruments.
• Since many of the risks faced by poor people are covariant in nature, informal management mechanisms at the family or community level are typically not very effective. For covariant risks, more government involvement tends to be required.

The World Bank operationalises the SRM framework through Risk and Vulnerability Assessments (RVAs). RVAs are being piloted with great success in developing countries, but more work is required at the conceptual, empirical and policy level. Implications of an increased focus on social protection include:

• Social protection should contribute to the achievement of a better balance among risk coping, risk mitigation and risk prevention strategies.
• The outcomes of crises demonstrate that the basic social risk management instruments should be in place before the crisis hits. Social protection should contribute to a better match of instruments with risks.
• The role of government in making the match between supply and demand of risk management instruments is complex. Government should provide its own instruments, but it should also increase the supply and effectiveness of instruments from other sources.
• There is a need to review and reassess traditional social protection programs such as labour market interventions and retirement income provisions.
• Risks that confront particularly vulnerable groups should be addressed holistically with appropriate public, community and private interventions. Justified by a risk management perspective, the World Bank is giving special attention to working children, unemployed youth, orphans, and the disabled.

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Source: World Bank, 2003, ‘Social Risk Management: The World Bank’s Approach to Social Protection in a Globalising World’, Social Protection Department, World Bank, Washington D.C.