Risk Management

HRIA Compendium Groups

ABSTRACT: “Boatright takes a look at the complex phenomenon of risk management and some of the ethical issues associated with it. Although people have tried to manage risk for millennia, significant changes occurred in the mid-1990s that transformed risk management into a science that now guides much financial and business decision making. A product of sophisticated mathematical models made possible by powerful information technologies, today’s risk management tools have created exotic securities and new markets that reduce some risks and increase others. Many critics have argued that there are important technical and ethical problems associated with these practices and that they may have significantly contributed to the Great Recession of 2007.”

ABSTRACT: “The UN Guiding Principles on Business and Human Rights endorse a risk management perspective of human rights due diligence, which may create ambiguities with regard to the nature of risk and the objectives of risk management. By ‘human rights risk’ we understand a business enterprise’s potential adverse human rights impacts. Human rights risk can be contrasted to an enterprise’s ‘social risk’ which refers to the actual and potential leverage that people or groups of people with a negative perception of corporate activity have on the business enterprise’s value.

This article puts forward the argument that due diligence in respect of human rights risk is conceptually incompatible with the management of social risk, because social risk management and human rights due diligence vary at each step of the risk management process (risk identification, risk measurement and assessment, risk reduction measures). To resolve this incompatibility, an effective integration of human rights due diligence processes into corporate risk management systems would require an elevation of human rights respect to a corporate goal that determines corporate strategy.

ABSTRACT: Assuring the existence of internal systems for effective risk management is a core component of corporate governance, embedded in best practice and the laws of many countries. Yet the global recession caused by the financial meltdown and the runaway Deep water Horizon leak in the Gulf of Mexico show, yet again, that the consequences of a business failure to anticipate and plan for catastrophic risks can devastate companies, society, communities, and the environment. In light of disasters like these, companies must take a hard look at the effectiveness of their own risk management systems. Unless they incorporate more effectively the interests of external stakeholders who may be harmed if and when the worst occurs, however, companies may still get it wrong. Building on the concept of ‘human rights due diligence’, factoring those views into company risk management requires the company to understand and address the adverse impacts of their activities on all stakeholders, internal and external to the company.”

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