Management of Risks
In the context of an organization, risk is defined as any event or circumstance that can negatively affect that organization. Risks can appear because of the uncertainty on the financial markets, because of project failures, legal debt, crediting risk, ac
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Management of Risks
If you do not have integrity, you have nothing. You cannot buy it. You can have all the money in the world, but if you are not an ethical and moral person, you do not really have anything. —Henry Kravis, cofounder of Kohlberg Kravis Roberts & Co.
In the context of an organization, risk is defined as any event or circumstance that can negatively affect that organization. Risks can appear because of the uncertainty on the financial markets, because of project failures, legal debt, crediting risk, accidents, natural causes, and catastrophes, as well as intentional attacks from a competitor or other unpredictable events. Therefore, we can talk about management risks, such as brand and reputation risk; competition risk; customer risk; bankruptcy and the risk induced by suppliers; operational risks such as the commercial, personnel, technological, and e-risk; and financial risks. One of the most notable risks, strongly tied with the compliance and brand and reputation risk, is the risk due to the lack of integrity. Integrity, one of the most important qualities of a company, is difficult to uphold, but extremely easy to lose. Corrupt practices that are sometimes imposed on the company by public officials with whom they are forced to collaborate, or by corporate abuses that can come from trading partners and competitors, as well as robberies, fraud, or dishonesty on behalf of the employees—these are just some of the practices that lead to destroying a company’s integrity. Once lost, integrity is almost impossible to get back. First, lack of integrity leads to big reputational losses that, even in happy cases, can require years to be straightened out. In addition to the reputational losses, a compromised integrity can lead to damages that are more concrete. Financial losses may arise, such as substantial fines, losses due to the costs of malpractice lawsuits,
© The Author(s) 2016 S. Văduva et al., Moral Leadership in Business, SpringerBriefs in Business, DOI 10.1007/978-3-319-42881-9_5
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Management of Risks
business failures, or even the company’s bankruptcy, let alone the substantial time lost for solving problems that could have been easily avoided through correct management of the lack of integrity. According to an LRN Corporation study from 2008, the most widespread risks in what concerns companies’ integrity in ethics and compliance are those concerning electronic data protection (52 %), data confidentiality (47 %), and intellectual property (32 %). Also notable are intellectual property and environment health (30 %), foreign corrupt practices and anti-bribery (27 %), sexual harassment (26 %), export controls (23 %), interests conflicts (21 %), supply chain issues (20 %), and insider trading (16 %).
5.1
Reputational Risks
It takes twenty years to build a reputation and five minutes to destroy it.—Warren Buffet, CEO of Berkshire Hathaway
One of the most important things for a company is its reputation. The better it is, the more people will trust it. A good reputation offers credibility a
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