• Home
  • Business
  • The Ethical Framework of an Organisation Dictates How They Engage With Risk

The Ethical Framework of an Organisation Dictates How They Engage With Risk Essay Example

  • Category:
    Business
  • Document type:
    Essay
  • Level:
    High School
  • Page:
    1
  • Words:
    586

Introduction

The risk management is a discipline that is evolving rapidly, and places ethical values at the core of enterprise risk management, good governance as well as compliance (Florio, 2011). Basically, leading standards acknowledge the importance of ethics and have clearly included ethics into the components of effective enterprise risk management as well as compliance. Meaningful changes are being made by organisations so as to espouse leading practices to improve the effectiveness of their risk management and regulatory compliance programmes. The essay discusses how the ethical framework of an organisation dictates how they engage with risk.

Discussion

According to stakeholder theory, conflict and risk management by means of stakeholder dialogue is crucial for successfully balancing the demands and needs of the stakeholder. The ethical framework of the organization should focus on how the stakeholders are managed. From a management point of view, unethical conduct seen in big companies such as Enron and Tyco confirms the need for ethical framework. Considering that unethical behaviours can result in drop in credit rating and market value, poor reputation, employees’ dislocation, legal penalties, and new legislation intended. In view of this, ethical concerns are similar to the conventional risks whereby a persons’ conduct and decision could result in either negative or positive outcomes. Therefore, ethics as mentioned by Young (2004, p.24) is a subject of both risk management as well as risk itself.

Therefore, managing successfully opportunities and risks depends on the organisation’s ethical framework, which is crucial for delivering strategic objectives, attaining sustainability, protecting the organisation’s reputation as well as adhering to the good corporate governance requirements. Although risk is not new in the organisations, managers have become more aware of it. Ethical framework is seen as an integrated and comprehensive approach to risk management. An ethical business culture framework was identified by the Centre for Ethical Business Cultures (CEBC), and it has five features that are connected congruently: Long-term perspective, stakeholder balance, values-driven, leadership effectiveness, and process integrity.

The ethical framework according to Jondle et al. (2013, p.34) presents a platform whereby a sense of right and wrong in the organisation is imprinted indelibly. Basically, by emphasising on the abovementioned features of the ethical framework, organisation can build and sustain its corporate culture according to the ethical principles. The model as mentioned by Jondle et al. (2013, p.37) focuses on the difference between values in action and implemented values, and this difference results in a ‘space’ wherein scores of ethical risks can surface. In view of the CEBC Model, the organizational culture is defined by valued and the organizational culture defines leaders’ behaviour, the way stakeholders are treated, and the effectiveness of internal processes.

Conclusion

In conclusion, the essay has highlighted how the ethical framework offers a basis for understanding crucial for risk management efforts in the organisation. As mentioned in the essay, understanding such values with reference to organisation’s ethical framework can offer direction on how to structure risk management according to the organisation’s implemented values. The ethical framework promotes risk management mentality in the organisation with regard to both espoused values as well as the discrepancies between values in action and the espoused values.

References

Florio, C.V.d., 2011. Compliance and Ethics in Risk Management. [Online] Available at: https://corpgov.law.harvard.edu/2011/11/25/compliance-and-ethics-in-risk-management/ [Accessed 15 March 2016].

Jondle, D., Maines, T.D., Burke, M.R. & Young, P., 2013. Modern risk management through the lens of the ethical organizational culture. Risk Management, vol. 15, no. 1, pp.32–49.

Young, P.C., 2004. Ethics and Risk Management: Building a Framework. Risk Management, vol. 6, no. 3, pp.23-34.