S7 CSR AND RISK MANAGEMENT Flashcards
GLOBALIZATION MEANS GREATER RISKS
- Created an operating environment for business leaders that is markedly different from national or local levels
- Uncertainty and unpredictability have increased
- Paradox : brings greater interdependence and complexity BUT greater uncertainty, unpredictability and vulnerability
GREATER SALIENCY OF CSR IN GLOBALIZATION
- Business operations are network-based with value Chains extending across different countries, regulatory regimes and cultures
- Stakeholders have empowered by new technologies and institutions
- Global civil society is increasingly organizers and able to act
WHAT IS RISK ?
- Function of threats exploiting vulnerabilities to obtain, damage or destroy assets
- When a threat meets a potential vulnerability, the business process is deemed to be at risk
- It arises when vulnerability exists within an organization’s operating system in the absence of effective controls and countermeasures
THREAT
Negative event that can lead to undesired outcome
VULNERABILITIES
Weaknesses in the system, and make threats possible
ASSESTS
Include people, property and information
RISK MANAGEMENT
- Aim to address uncertainty and risk in the market
- Seeks to create controls and countermeasures that
Minimize or eliminate disruption, loss or damage to
business operations
Shorten recovery time from unwanted event “
TYPES OF RISK
Social risk
Environmental risk
Technological risk
Economic risk
Political risk
CSR RELATED TO RISK MANAGEMENT BY:
- Providing intelligence about risk (collecting adequate information about the characteristics ad intensity of risks, require engaging with stakeholders not just disseminating information to them)
- Offering an effective means of responding to risks
GODFREY ET AL. (2009) : RELATIONSHIP >< CSR AND SHAREHOLDER VALUE
“CSR activities can provide an insurance mechanism to preserve financial performance
The effect is to not send a signal of complete altruism towards stakeholders, but rather signal that the firm is not completely self-interested, that is leaders can, do, and will consider impacts on others or the social good in their decisions
CSR represents a potential method of creating value for shareholders in the face of certain types of negative events “
GODFREY ET AL. (2009) : INSURANCE-LIKE PROPERTY OF CSR
Leads to positive attributions from stakeholders, who the, temper their negative judgments and sanctions towards firms because of this goodwill
GODFREY ET AL. (2009) : SOME TYPES OF CSR ACTIVITITES OFFER INSURANCE-LIKE
“Institutional CSR activities :
those aimed at a firm’s secondary stakeholders or society at large, provide an «insurance-like» benefit
Technical CSRs, :
those activities targeting a firms trading partners, yields no such benefits
“
GODFREY ET AL. (2009) : LARGE-N STASTICAL ANALYSIS
Event study of 178 negative leval/regulatory actions against firms throughout the 11 years from 1993-2003
