Business ethics and risk management PDF
Preview Business ethics and risk management
Ethical Economy. Studies in Economic Ethics and Philosophy Christoph Luetge Johanna Jauernig Editors Business Ethics and Risk Management Business Ethics and Risk Management Ethical Economy. Studies in Economic Ethics and Philosophy SeriesEditors AlexanderBrink,UniversityofBayreuth,Bayreuth,Germany JacobDahlRendtorff,RoskildeUniversity,Roskilde,Denmark EditorialBoard JohnBoatright,LoyolaUniversityChicago,Chicago,Illinois,USA GeorgeBrenkert,GeorgetownUniversity,WashingtonD.C.,USA JamesM.Buchanan(cid:2),GeorgeMasonUniversity,Fairfax,Virginia,USA AllanK.K.Chan,HongKongBaptistUniversity,HongKong ChristopherCowton,UniversityofHuddersfieldBusinessSchool,Huddersfield, UnitedKingdom RichardT.DeGeorge,UniversityofKansas,Lawrence,Kansas,USA ThomasDonaldson,WhartonSchool,UniversityofPennsylvania,Philadelphia, Pennsylvania,USA JonElster,ColumbiaUniversity,NewYork,NewYork,USA AmitaiEtzioni,GeorgeWashingtonUniversity,WashingtonD.C.,USA MichaelaHaase,FreeUniversityBerlin,Berlin,Germany CarlosHoevel,CatholicUniversityofArgentina,BuenosAires,Argentina IngoPies,UniversityofHalle-Wittenberg,Halle,Germany YuichiShionoya,HitotsubashiUniversity,Kunitachi,Tokyo,Japan PhilippeVanParijs,UniversityofLouvain,Louvain-la-Neuve,Belgium DeonRossouw,UniversityofPretoria,Pretoria,SouthAfrica JosefWieland,HTWG-UniversityofAppliedSciences,Konstanz,Germany Forfurthervolumes: http://www.springer.com/series/2881 Christoph Luetge • Johanna Jauernig Editors Business Ethics and Risk Management 123 Editors ChristophLuetge JohannaJauernig PeterLöscherChairofBusinessEthics PeterLöscherChairofBusinessEthics TechnischeUniversitätMünchen TechnischeUniversitätMünchen Munich,Germany Munich,Germany ISSN2211-2707 ISSN2211-2723(electronic) ISBN978-94-007-7440-7 ISBN978-94-007-7441-4(eBook) DOI10.1007/978-94-007-7441-4 SpringerDordrechtHeidelbergNewYorkLondon LibraryofCongressControlNumber:2013955740 ©SpringerScience+BusinessMediaDordrecht2014 Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpartof thematerialisconcerned,specificallytherightsoftranslation,reprinting,reuseofillustrations,recitation, broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,andtransmissionorinformation storageandretrieval,electronicadaptation,computersoftware,orbysimilarordissimilarmethodology nowknownorhereafterdeveloped.Exemptedfromthislegalreservationarebriefexcerptsinconnection with reviews or scholarly analysis or material supplied specifically for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work. 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Printedonacid-freepaper SpringerispartofSpringerScience+BusinessMedia(www.springer.com) Contents PartI RiskManagementandRiskTaking RiskTakingandtheEthicsofEntrepreneurship............................. 3 ChristophLuetge PartII RiskManagementonFinancialMarkets ThePresentUseoftheFuture:ManagementandProduction ofRiskonFinancialMarkets................................................... 17 ElenaEsposito Epistemically Virtuous Risk Management: Financial Due DiligenceandUncoveringtheMadoffFraud................................. 27 BoudewijndeBruin PartIII RiskManagementinOrganizations Risk Management, Banality of Evil and Moral Blindness inOrganizationsandCorporations............................................ 45 JacobDahlRendtorff TransformingRisksintoMoralIssuesinOrganizations .................... 71 CristinaBesio Decision-MakingasNavigationalArt:APragmaticApproach toRiskManagement............................................................. 85 MatthiasGronemeyer v vi Contents PartIV PhilosophicalIssuesofRiskManagement Beyond Risk Management, Toward Ethics: Institutional undEvolutionaryPerspectives ................................................. 99 ThomasBeschorner Consequentialism,DeontologyandtheMoralityofPromising............. 111 NikilMukerji PartV CaseStudiesinRiskManagement TheNuclearPowerPlant:OurNew“TowerofBabel”? .................... 129 JulieJebeile TheGlobalEconomicCrisisasaRiskfortheInternational TradeinHanoi.................................................................... 145 HoangAnhNguyen AuthorIndex...................................................................... 157 SubjectIndex..................................................................... 159 Introduction: Business Ethics and Risk Management After the outbreak of the economic crisis, the immediately following search for culprits quickly resulted in pillorying a specific professional group: the risk managers of the financial industry. As was (and still is) commonly believed, risk managers have been juggling unscrupulously with figures and numbers until even most hazardous financial risks looked like safe and sound investments. This description may be superficial and polemic to a great extent, but it highlights the fact that risk calculation is not only a question of financial benefit, but an ethical questiontoo.Consequently,theresponsiblebusinessmanshouldnotonlycalculate financialortechnicalventures,butalsoethicalrisks. Issues of moral risks in general have become more and more important over the last decades. First, growing awareness among citizens of social or ecological problemssuchasthegreenmovement,theantinuclearmovement,orvariousantiwar movements has given more weight to ethical concerns in business. Second (and closelyrelated),differentcorporatescandalsprovedthatethicalriskscanturninto economicrisksinaninstant. ScandalsrangingfromtheFordPintoCaseinthe1970stotheMadoffinvestment fraud or the Fukushima nuclear disaster can serve as examples of how closely intertwined ethical and economic issues can be. It is not only the outright breach of law followed by sanctions that a thoughtful businessman must seek to avoid, but also the heavy reputation losses that can occur even if the company’s conduct lies within the legal framework (e.g., weapon supply to autocratic states). So it is in the companies’ very own interest to consider ethical risks. Especially under conditions of globalization, these matters are greatly aggravated: In the global regulatoryframework,gapsemergeinmanyplaces.Thesespacesneedtobefilled witharesponsible,risk-consideringentrepreneurialconduct. But there is more to the risk management of a responsible businessman than avoidingharmfulexternalities.Especiallyinourmoderneconomy,inaworldwhere positive-sum games are played, it positively becomes a moral obligation for a businessman to take entrepreneurial risks. Making business essentially consists of risk taking. Without it, no company can flourish or even survive in the long run. Reflecting on the work of Adam Smith, one could argue that it is precisely the vii viii Introduction:BusinessEthicsandRiskManagement entrepreneurial risk taking that we expect our dinner from. Thus, within a (well- functioning) order-framework, making profit, which is not possible without risk taking,becomesamoralobligation. ThislineofthoughtisexploredfurtherinthefirstsectionbyChristophLuetge’s chapter“RiskTakingandtheEthicsofEntrepreneurship.” Thesecondsectionofthevolumedealswithriskmanagementinthecontextof financial markets. Elena Esposito argues that under conditions of risk, a complex ethical attitude is needed which abandons the idea of principles of behavior that allow to univocally distinguish a good position from a bad one. However, types of behavior should be signaled that reduce the variety of future possibilities. In his chapter on the Madoff investment fraud case, Boudewijn de Bruin argues that financialduediligencecomplementedbyepistemicvirtuescanbeaneffectiveshield againstfinancialcrime. Riskmanagementinorganizationsisthesubjectofthethirdsection.JacobDahl RendtorffanalyzeshowHannahArendt’sconceptofmoralblindnesscanbeapplied tospotadministrativeevilinorganizationsandcorporationsinrelationtoakindof riskmanagementthatisblindtothemoralconsequencesofmanagementdecisions. CristinaBesioalsoexaminesriskmanagementinorganizations.Sheexamines,from asociologicalpointofview,thefunctionalroleofmoralcommunicationindealing withrisksthatariseinuncertainsituationscharacterizedbyconflictsanddivergent opinions about specific technical issues.In his contribution, Matthias Gronemeyer holdstheassumptionthatuncertaintyandriskareirreducible.Theriskofeconomic failure, he argues, cannot only be kept at bay by a framework of rules and laws. Whatisneededinadditionisthe“economicallymaturecitizen”whoiscapableof combiningseveralmoralprinciplesinordertoyieldthedesiredlimitationofriskin business. In the next section, philosophical issues of risk management are explored. Thomas Beschorner appeals to the individual as a moral actor. In order to foster goodbusinesspracticesratherthanonlyavoidharm,hearguesthatthemoralagent has to be brought back into play, and institutional measures need to be reflected topromoteCorporateSocialResponsibility.NikilMukerjitakesonestepbackand analyzes what underlies many business relations and contracts – the reliability of promises. In his chapter, he analyzes the consequentialist and deontological views onthematter. Inthelastsection,riskmanagementisexaminedonthebasisofcasestudies.Risk inanareawherefailuremayleadtohazardouseventsisthetopicofJulieJebeile’s chapter. Using the example of the Fukushima nuclear disaster, she shows how imperfect epistemic control on nuclear power plants and group inertia in decision makingandactionledtothecatastrophe.NguyenHoangAnhappliestheproblem of risk to a specific example. She depicts how the global international crisis has affectedtheeconomyofHanoiwhereinternationaltradeplaysakeyrole. ChristophLuetge JohannaJauernig Part I Risk Management and Risk Taking
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