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Socially responsible risk management – the ugly truth

Key message: Risk management like social responsibility starts with the individual not the corporation

I was discussing risk management and how it applied with my Corporate Social Responsibility (CSR) guru (teacher) in Indonesia recently and Dr. Maria Radyati (from the Centre for Entrepreneurship, Change and the Third sector - CECT) reminded me that before we could talk about risk management in the CSR space I needed to be very clear about a few things. One of things was that any CSR should start with the individual. Therefore, the acronym CSR should not be translated as Corporate Social Responsibility rather as Citizen Social Responsibility.

Hence, my framing the acronym C2SR (Citizen and Corporate Social Responsibility). She argued that corporations are made up of citizens and it is their attitudes, backgrounds, ethics, and morals that define the organisation and whether or not the corporation will be or become a socially responsible business. I found this to be very profound and a mind changer for me when I wanted to consider how risk management as a concept and methodology could be used in conjunction with my new model of C2SR.

Courtesy of Getty

I slowly came to the view that C2SR is in fact one more risk mitigation strategy available to organisations. The negative event or threat to an organisation in this C2SR context is the game changer – “If corporate entities do not take into account the social impact of the business, its activities and decisions across its entire value chain then they are at risk of going out of business”.

In Australia, the manufacturing sector is in decline. There are many reasons for this but as corporates look for savings in their value chain they are seeking and then establishing their production/manufacturing operations offshore and more particularly in Asia. This presents a number of threats as well as opportunities. I want to focus on the threats. Without naming names there are a number of internationally renowned brands whose reputations have been tarnished as a result of recent textile factory fires in Bangladesh. This is evidence that larger corporates do not understand or ignore their whole value chain and therefore cannot claim to be socially responsible businesses.

Interestingly whilst corporations search Asia for savings, in Indonesia there is now legislation in and around CSR. The merits of legislating this CSR is not the subject of this article rather the fact that there is legislation, then the major threat event to business continuity in the Indonesian context converts from reputation to non-compliance.

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