Column: Risk Management

Don’t Exclude Morality from Risk Management

I will never forget a vibrant debate that occurred at an international risk management conference years ago. It stuck with me all these years. The subject was that of morality. We debated how morality affects our risk management practices globally, whether moral beliefs are inherent to human nature and whether they are negotiable depending on your country.

We discussed acts such as murder — a universally immoral act. But the discussion got murkier on “corporate morality.” One act stood out: Was the issuance or acceptance of kickbacks or bribes to gain a business advantage considered moral?

Such acts were argued as being ‘normal’ practice depending upon the country. Risk managers felt beholden to the shady tactics and had to surrender to them.

The question remained: if something of questionable ethics becomes mainstream, does it stop being immoral?

One risk manager whose firm clearly struggled with corrupt acts spoke up: “What is considered normal for the company, does not make it moral with all of us. Shareholders, employees and the community feel this. We will suffer the consequences ultimately. Morality must prevail.”

I think part of a CEO’s objective is to define an organization’s purpose and assure that purpose trends toward good. The CEO must foster a culture that is loyal to that purpose, assures it can stand the test of time and is in the best interests of all its stakeholders.

In the end, a company is merely a collection of people who come to work everyday motivated by their own moral codes – codes expressed by the nagging voices that torment them when they do wrong. Threading those morals into a unified culture gives an organization a corporate soul. Management actions deeply affect this culture and the ability to grow loyalty, profits and innovation.

What is considered normal for the company, does not make it moral with all of us. Shareholders, employees and the community feel this. We will suffer the consequences ultimately. Morality must prevail.

Does morality matter in business and in modern capitalism? Should dog-eat-dog? Do good guys end up last? Maybe in the short-term dogs will win, but not in the long.

These ideas are best expressed in the book which I treat as the risk management bible for corporate sustainability: Corporate Survival: The Critical Importance of Sustainability Risk Management, by Dan Anderson.

The book examines “the rising sustainability risks that affect thriving businesses, the environment, various societies, people in foreign lands, and our children.” It says for a company to survive and thrive, it must respectfully balance profits, planetary footprint, and the people affected by its purpose: People, Planet and Profit in harmony.

If one P is neglected, survival is at risk. Good management requires the perpetual reconciliation of competing obligations of all the Ps.

A crystal clear moral code is needed to keep decisions in line. There can be no moral ambiguity. When an organization suffers eclipses of integrity or moral meltdowns, this only leads to organizational meltdown. &