Why is social value creating business risk?
What are the business risks and how to avoid them?
The prevalence of social value questions since the UK Government made social value ‘mainstream’. Mandating it to be evaluated and awarded a 10% minimum weighting in all Central Government contracts left suppliers facing various challenges. From understanding what ‘good’ social value looks like to responding to the sheer quantity of social value questions in bids.
“For any other question worth 10% or 20% of the marks, we’d have a whole team dedicated to writing the response, but with social value, for some reason, we don’t.”
Eighteen months after the introduction of PPN06/20. One barrier stopping companies from getting social value right is getting senior leadership to ‘take it seriously.’
By not resourcing it properly and leaving social value questions until the last minute. Resistance to requests for assistance from other departments who don’t see social value as a cross-departmental effort. These are all symptoms of the same issue. Senior leadership does not realise how significant social value is to their public sector customers and why it should be a priority for the business.
So, what can you do? If you’re the person facing the barrage of social value questions alone. You will know what the problems are and have some of the solutions. You know what a difference getting this right could make for your company. If only you could get someone senior to focus on it long enough to be effective.
We have two magic words for you: ‘Business Risk’. Use them, and we promise you’ll start getting some attention.
Staff are struggling to get their companies to take social value seriously and access the vital resources needed to navigate risks effectively.
Photo by JESHOOTS.COM on Unsplash
What is a business risk?
Business risk refers to anything which could cause an organisation to lower its profits or fail, which is why those two words have an almost mystical power to focus attention on any company.
Business risks can originate both inside and outside of a company. There are many distinct types of risks (see image). Monitoring and managing business risk is the responsibility of Business Assurance (BA) teams. The best way to address business risk is to try and prevent it from ever happening, rather than solving problems as they occur. To do this effectively, business assurance professionals carry out regular risk assessments and create ‘risk mitigation' strategies to combat risks based on how likely they are to occur.
Here at Samtaler, we spend considerable time supporting and working with the people responsible for dealing with social value in their companies. Often they’re just one person (sometimes, social value is their whole job, but frequently they’re doing it alongside other responsibilities).
They tell us they can see their business is exposed to significant risk, but their managers don’t understand what social value is or how much of an impact it’s having on public sector procurement. As a result, staff struggle to get their companies to take social value seriously and access the vital resources needed to navigate risks effectively
There are many types of risks and ways to stop them happening. But they must be anticipated by the right people, at the right time.
Why is social value creating business risk?
1. It's been adopted without the need for legislation
The UK Government introduced Procurement Policy Note 06/20 (PPN06) in September 2019. It meant that virtually overnight (or so it seemed to some people), £300 billion ( approximate figure ) a year of public spending decisions became subject to social value considerations.
Traditionally when the Government wants to implement a change of this magnitude, it does so via legislation which comes with lots of consultation, white papers, reading of bills and debate in both chambers of parliament. In short: you get plenty of notice which gives businesses time to prepare; with PPN06, that didn’t happen.
2. It’s a priority for public sector policymakers and procurers which means it’s being embraced at speed and is worth an increasingly large percentage of overall scores
The public sector hates spending public money on private sector suppliers. Whose only value they create is the profits and large salaries they pay shareholders and employees. They want to buy from companies that behave ethically and responsibly. Social value gives them a chance to do that. And they embrace it.
3. Lack of expertise
Companies don’t have enough staff who know social value and how to deliver it, so they’re learning ‘on the job’ (and making mistakes).
Individual staff are doing their best to respond to social value questions. However, with more questions in tenders, they don’t have the resources or the specialist knowledge and experience to do social value properly. This is a substantial risk when hundreds of millions of contracts are at stake.
4. Lack of coordination and control
Proper processes and systems not being in place to manage social value mean the chances of social value-related risks are highly likely. The ideas bid writers come up with to put in their proposals are only one part of delivering social value. Other questions to ask yourself include how commitments are costed? What controls are in place governing what bid writers can offer? Does your social value offer match your corporate initiatives and rhetoric? How (if your bid is successful) will you deliver the commitments and reporting of outcomes to the client? Multiply that activity over multiple contracts and factor in financial penalties for non-compliance. You’ll begin to see the issue.
6 Things you can do to mitigate social value related risk. Photo by Hello I'm Nik on Unsplash
Here is a list of six things you can do today; to help your company take action to mitigate social value related business risk. Some are ‘quick wins’ while others require a more long-term approach.
1. Designate someone to take responsibility for social value
Make social value someone’s job. Many people are doing it in addition to all their other responsibilities. Please create a new position but make sure it has social value in the title, so everyone in the organisation knows whom to go to when they have a social value question.
2. Get social value risks added to the Risk Register
Set up a meeting between business assurance and the people responsible for social value to explain some challenges the business is experiencing. A key outcome would be social value-related risks added to the risk register. That will help raise awareness of the issue, prioritise social value, and get the senior-level buy-in and resources you need to do it properly.
3. Produce a social value proposals library
Work with internal stakeholders to define your social value offer, and get it costed and signed off. Create a library containing a standard series of answers mapped to the questions in the Social Value Model. That bid writers can use as a basis for their social value answers. (You can find more detail on the Social Value Model in our Social Value Model blog). Remember that each social value answer must be specific to suit the specifications of each tender. The library is only a guide, but at least everyone will know your core social value offer and what they can include.
4. Create a Social Value Commitments Register
When you work in a complex organisation with multiple bid teams and hundreds of tenders for public sector customers. Creating a social value commitments register is a way to track and monitor your exposure to social value commitments. As well as ensuring that promises made are followed and delivered if you win the contract. Trust us - in the rush of implementation, it’s easy to lose track of your social value commitments at the tender stage. You will be glad you made a record, along with the bid library, but it’s also a resource bid teams can use to see offers made on other bids and get ideas.
5. Create social value policies and procedures
This one takes a bit of time. But doing it will mean you provide guidance to staff, answer questions, solve ambiguities, detail best practices, and help manage risk to the business associated with social value activities.
6. Start treating social value as you would any other contractual requirement worth 10% of the total marks
If there's one thing you can do today that would make a difference, it's this. Please keep it simple: use the same internal processes to get other commitments you make designed, costed, approved, tracked and delivered. This will go a long way to mitigate many of the risks we're seeing.
Following these steps will help mitigate social value business risks, improve your chances of winning Central Government contracts, and boost your business's reputation.
A sophisticated approach to social value will also give you an edge over competitors.
How we can help
At Samtaler, we understand the importance of your social value commitment. You’re here because you care about your business’s impact on society and want to be better. We want you to succeed, and we know from experience that achieving social value requires skill, strategy, and support.
To find out how we can help, send an email to hello@samtaler.co.uk
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