Risk Management’s NewTool: Corporate Social Responsibility

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Introduction

All types of business involve some risks and it is the responsibility of the managers and leaders of an organization to identify the risks effectively an to take necessary initiatives for managing those risks. Corporate social responsibilities are those responsibilities that an organization has towards the planet, economy and society. Previously, people used to think that the main purpose of corporate social responsibility is essay typer UK to improve the brand image of an organization and to earn good reputation in the industry (Safarzad et al. 2016). However, in these days, it has become an important question that if there is a relationship between risk management process and corporate social responsibility of an organization or if corporate social responsibility can be used as a risk management tool. According to many researchers, corporate social responsibility is an important part of effective risk management process in any organization (Nguyen and Nguyen, 2021). On the other hand, some people also say that managing business risks is an important part of corporate social responsibility. The main objective of the study is to analyze foe corporate social responsibility can be used as an effective tools for business risk management.  

Main body

The concept of corporate social responsibility

According to Archie Carroll, the founder of CSR pyramid theory, all business organizations have some responsibilities towards the community and the economy in which they are operating. An organization can achieve long term growth and sustainability in business when the organization can perform its corporate social responsibilities effectively (Tilt, 2016). As per the assumptions of the CSR pyramid model of Archie Carroll, there are mainly four types of corporate social responsibilities of an organization. Those are economic responsibility, online assignment help manchester legal responsibility, ethical responsibility and philanthropic responsibility. Economic responsibility is at the base of the pyramid and this means, the most important responsibility of a business organization is to remain profitable for long term (Frynas and Yamahaki, 2016). All business organizations have contribution towards the economy of the countries where they operates. In case, a business organization can remain profitable for long term, it can facilitate the growth of the economy of the countries where it operates. On the other hand, collapse of large organization can have significant negative impact on the economy.

The growth of the economy can help improve the quality of lives of people in a country. For this reason, all business organizations need to take necessary initiatives for remaining profitable for long term. Along with that, finance coursework help uk,  the organizations also need to follow relevant legislation that can be applied to their operations. This is considered as the legal responsibility of business organizations (Latapí Agudelo et al. 2019). Along with that, an organization needs to follow ethical principles while managing and running their business operations. It is the ethical responsibility of business organizations to find out possible ethical issues related to their business operations and they need to take necessary efforts for resolving and even preventing those ethical issues. After performing the economic responsibility, legal responsibility and the ethical responsibilities, an organization needs to perform the philanthropic responsibilities (Safarzad et al. 2016). Philanthropic responsibilities can be performed by taking necessary initiatives for the development of communities in which the business organization operates. When an organization performs all these responsibilities effectively, it becomes easier for the organization to achieve long term sustainability in business.

Similarly, triple bottom-line theory of sustainability also supports this view. According to this theory also, an organization needs to improve its impact on the economy, natural environment or planet and the society (Pérez-Cornejo and de Quevedo-Puente, 2022). This theory also provides enough importance to remaining profitable for long term and to reduce the negative impact of its operations on the environment and the society or the communities in which the organization operates (Nguyen and Nguyen, 2021). Considering all these facts, it can be said that the performance of corporate social responsibility can help an organization to maximize its profitability and also to reduce its harmful impact on the society and the natural environment. Along with that, the performance o corporate social responsibility can also help an organization to achieve long term growth and sustainability in business. Besides this, the performance of corporate social responsibility also helps improve the brand image of an organization and therefore, it becomes easier for an organization to expand its business and to achieve rapid growth.

Relationship between risk management and how corporate social responsibility can be a risk management tool

By reviewing the theories and concepts related to corporate social responsibility, it can be identified that the performance of corporate social responsibility is important for remaining profitable for long term and also for achieving long term and sustainable business growth. Along with that, the performance of corporate social responsibility also helps an organization to avoid legal and ethical issues that can negatively impact its business performance and its reputation in its respective industry. The main purpose of risk management is also to avoid business losses and to help an organization to achieve long term growth in its industry. Along with that, an organization also needs to avoid risks of ethical issues and legal issues in order to avoid scandals and to keep satisfy its stakeholders. Along with that, avoiding risks of legal and ethical issues is also important for improving brand image and to earn a good reputation in is respective industry. By applying the assumptions of the CSR pyramid theory, it can be said that the CSR pyramid also provides enough importance to running business ethically and it also emphasizes on following relevant legislations (Eriandani and Wijaya, 2021).

Along with that, both the theory of Carroll and the triple bottom-line theory provide enough importance to remaining profitable and remaining profitable for long term is possible only when an organization takes necessary steps for preventing or managing financial risks, operational risks, strategic risks and other risks that can cause business losses. In addition to managing financial risks and the risks of ethical and legal issues, the performance of corporate social responsibility can also help avoid and manage environmental risks (Sarfraz et al. 2018). From this perspective, it can be said that there is a close relationship between the process of risk management and the performance of corporate social responsibility and thus performance of corporate social responsibility can be considered as an effective tool of managing business risks. Environmental risks and other risks can also be managed by performing corporate social responsibilities effectively (Singh, 2021). On the other hand, the theories and models of corporate social responsibility also inspire business organizations to take necessary initiatives for improving the quality of lives of the community people and to preserve the biodiversity of the world just like a responsible citizen (Wirawan et al. 2020).

This additionally helps an organization to improve its brand image and this is important for increasing sales and to achieve long term growth in business. Considering all these facts, it can be said that the main purpose behind the risk management process and the performance of corporate social responsibilities is the same (Vagin et al. 2022). Therefore, corporate social responsibility can be considered as a new and innovative approach towards managing risks and it is essential for all business organizations to perform their corporate social responsibilities in order to prevent and manage business risks also. Along with that, it is important for organizations to identify possible business risks and to take necessary initiatives for managing hose business risks in order to perform their responsibilities towards the economy, society and the natural environment.

Recommendations

All business organizations need to identify their corporate social responsibilities and they need to take necessary initiatives for performing those responsibilities. It is the responsibility of all business organizations to find out innovative ways for remaining profitable for long term. In this context, an organization needs to take initiatives for managing financial risks and strategic risks. Along with that, it needs to take initiatives for continuously improving the quality of its products and services (Singh, 2021). Besides all these things, the organization needs to identify the legal risks and ethical risks and it needs to make the staffs and managers aware about the ways of managing and avoiding those risks (Neitzert and Petras, 2022). All business organizations need to analyze the impact of its business operations on the natural environment and the communities and after that the organizations need to take necessary initiatives for reducing their negative environmental effects and they also need to make efforts for improving the quality of lives of the community people.

Conclusion

The study discusses about the relationship between corporate social responsibility and the risk management process in business. From the above discussions, it can be concluded that there is a close relationship between the risk management process and the performance of corporate social responsibility. The purposes of both the risk management processes and the corporate social responsibility are same. The risk management process can help an organization to avoid financial loss, legal issues, ethical issues and environmental risks and eventually helps keep stakeholders satisfy and effective risk management process also helps an organization to achieve long term growth in business. Similarly, performance of corporate social responsibility helps an organization to achieve long term growth and sustainability in business and it helps the organization to maximize its profits and to avoid legal, ethical and environmental issues.

References

Sarfraz, M., Qun, W., Hui, L. and Abdullah, M.I., 2018. Environmental risk management strategies and the moderating role of corporate social responsibility in project financing decisions. Sustainability, 10(8), p.2771.

Vagin, S.G., Kostyukova, E.I., Spiridonova, N.E. and Vorozheykina, T.M., 2022. Financial Risk Management Based on Corporate Social Responsibility in the Interests of Sustainable Development. Risks, 10(2), p.35.

Neitzert, F. and Petras, M., 2022. Corporate social responsibility and bank risk. Journal of Business Economics, 92(3), pp.397-428.

Pérez-Cornejo, C. and de Quevedo-Puente, E., 2022. How corporate social responsibility mediates the relationship between corporate reputation and enterprise risk management: evidence from Spain. Eurasian Business Review, pp.1-21.

Nguyen, L.T. and Nguyen, K.V., 2021. The impact of corporate social responsibility on the risk of commercial banks with different levels of financial constraint. Asia-Pacific Journal of Business Administration, 13(1), pp.98-116.

Singh, N.P., 2021. Managing the adverse effect of supply chain risk on corporate reputation: The mediating role of corporate social responsibility practices. Journal of General Management, 46(4), pp.251-261.

Wirawan, A.W., Falah, L.J., Kusumadewi, L., Adhariani, D. and Djakman, C.D., 2020. The effect of corporate social responsibility on the firm value with risk management as a moderating variable. Journal of Asia-Pacific Business, 21(2), pp.143-160.

Eriandani, R. and Wijaya, L.I., 2021. Corporate Social Responsibility and Firm Risk: Controversial Versus Noncontroversial Industries. The Journal of Asian Finance, Economics and Business, 8(3), pp.953-965.

Safarzad, R., Farahnaki, E. and Farahbakhsh, M., 2016. Corporate social responsibility, theories and models. Theories and Models (September 3, 2016).

Latapí Agudelo, M.A., Jóhannsdóttir, L. and Davídsdóttir, B., 2019. A literature review of the history and evolution of corporate social responsibility. International Journal of Corporate Social Responsibility, 4(1), pp.1-23.

Frynas, J.G. and Yamahaki, C., 2016. Corporate social responsibility: Review and roadmap of theoretical perspectives. Business Ethics: A European Review, 25(3), pp.258-285.

Tilt, C.A., 2016. Corporate social responsibility research: the importance of context. International journal of corporate social responsibility, 1(1), pp.1-9.

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