Reducing social risk is to assist individuals, households, and communities better manage risk, and to provide support to the critically poor. As a result of economic and political liberalization, globalization among other forces, households tend to face more risks now than in the past. Due to increase risks faced and decreased ability to manage risks, many poor and near-poor households are expressing anxiety about their perceived vulnerability. Government regulation can usually reduce social risk.

A successful society can be achieved by taxing higher rates and many of the governments are practicing it today. The funds received from the tax are channeled back to the economy through subsidies and loans to the poor. The effectiveness of such schemes depends on a lot of factors including the level of transparency and accountability in government, the sustainability of the project and the existing political environment.

For example, in Sweden, paying high taxes is considered to be a benefit. Swedes' personal income tax can be as little as 29 per cent of their pay, but most people (anyone earning over £32,000) will pay between 49 and 60 per cent through a combination of local government and state income tax. Taxpayers get back what they pay for through various situations such as free education – public and private and free health and dental care for under 18s. There are also child allowance of £ 1,080 a year per child and can enjoy parental leave lasting 480 days as 390 days will receive 80% of income. And most Swedes can also enjoy 55% of their salary as pension with occupational pension amounting to 70% of their income when they retire. In case of unemployment, most of the people can receive 80% of their previous salary for the first 200 days of inactivity and dropping to 70% of the next 100 days. Based on the case of Sweden, taxpayers get better value for money if they paid more, rather than less. This shows that social risk can be reduced through government regulation by implementing higher taxes and it proves that society gets what it pays for.

Every case has its advantages and disadvantages. Providing social infrastructure such as free education, better health care, higher pensions and other allowances can have lower exposure to risk for the society. But the cost of reducing the social risk is high as it leads to higher taxes and higher prices.