Poor people are more vulnerable than other population groups because they are typically more exposed to risk and have few ways to manage it. Being poor, and hence vulnerable, makes individuals very risk-averse, and therefore unwilling or unable to engage in high-risk/return activities such as growing new cash crops that earn more money for farmers but which could be vulnerable to bad weather or a period of fluctuating prices.

This new view on social protection has embraced a new definition, namely "public interventions to assist individuals, households, and communities to better manage risk, and provide support to the critically poor." This new definition gives social protection a forward-looking role for lasting poverty reduction.

Dealing with risks involves recognising the source and economic characteristics of the risks; for example, whether they affect individuals in an unrelated manner or simultaneously. The most appropriate combination of risk management arrangements (informal, market-based, or publicly-provided or mandated) and risk management strategies (prevention, mitigation, or coping) in any given situation depends on the type of risk and on the costs and effectiveness of the available instruments.

Informal Arrangements: These arrangements have existed for a long time and still constitute the of risk management for the majority of the world's population. Examples of this kind of arrangement include: the buying and selling of (such as cattle, real estate, and gold), informal borrowing and lending, diversifying crops and field use, and the use of safer production technologies (such as growing less risky crops).

Market-Based Arrangements: Individual households will also take advantage of market-based institutions such as money, banks, and insurance companies when they are available. Evidence suggests that establishing a sound banking system and non-inflationary policies are crucial to and managing risk.

Because formal market institutions are reluctant to lend to households without secured earnings, micro-finance is also an important feature of social risk management.

Public Arrangements: Public arrangements for dealing with risk are relatively scarce and have very limited coverage in the developing world for economic and other reasons. When informal or market-based risk management arrangements do not exist, break down, or are dysfunctional, the government must provide or mandate (social) insurance programs for risks such as unemployment, old age, work injury, disability, widowhood, and sickness. For this reason, there is a great deal of public intervention in risk coping.

"The development community needs to move beyond thinking that social protection is just about money, which may help people cope with the symptoms of poverty for a while but does little to eradicate its causes," says Robert Holzmann, the World Bank's Director of Social Protection, and the lead author of the report. "With this new risk management strategy, the Bank would offer developing countries, in consultation with their poor communities, help in tailoring their social protection plans to fit their own assessment of where they might be vulnerable. It may be they need access to basic medical care, or clean drinking water, or ways to stop their farms being flooded every year. If we can help them be proactive about reducing their exposure to risk in the first place, communities can do more to shield themselves from preventable misfortune, and thereby lead more secure lives."

Risk management can take place at different moments-both before and after the risk occurs. The goal of proactive measures is to prevent the risk from occurring, or, if this cannot be done, to mitigate its effects. Individual efforts can prevent risks, but in many cases they require government support (for example, disaster prevention). Coping also requires government support since poor people are typically less able to weather crises on their own and, therefore, often experience irreversible negative effects. For this reason, there is a great deal of public intervention in risk coping.

Reducing Risk: Reducing the probability of downside risk is a powerful instrument of social risk management. Many risk reduction efforts remain outside the scope of social protection, such as maintaining macroeconomic stability, creating sound financial markets, adopting growth-oriented policies, and establishing preventive measures against natural disasters.

Some social protection instruments that support risk reduction are, however, essentially linked to the labour market, namely better job and skills training and eliminating harmful child labour.

Mitigating Risk: Not all risks can be eliminated in life. However, the absence of risk-mitigation makes people (especially poor people) more risk-averse. Therefore, risk-mitigation measures (such as unemployment benefits) that maximise benefits while minimising costs are needed. Another measure, which is particularly important with a rapidly growing population of elderly people worldwide, is old-age income security. But pension security has to go beyond formal sector pension schemes. More emphasis must be given to non-contributory schemes for long-term poor people, and savings schemes for others who work outside the formal, mainstream economy, as well as the many self-employed.

Coping with Risk: Coping with crisis once it has struck is where the government has an important role in ensuring rights to financial and real assets, such as saving accounts and land, that can be drawn upon in times of emergency; but for poor people who have no assets, the government is the provider of last resort. The main forms of public risk-coping assistance include emergency cash payments; transfers of food, fuel and other emergency goods; and public works. The appropriate size and mix of programs will vary from country to country, and by its administrative capacity. Moreover, with all of these programs it is important to understand the cultural factors determining resource allocation within the household. For example, targeting strategies must recognise that, in many cultures, women and girls receive proportionately less food and other assistance than their male counterparts.

(From World Bank's press release on its new report - From Safety Net To Springboard)