Current Issues in Risk Management: A Portfolio BY YOU YOUR SCHOOL INFO HERE YOUR COURSE INFO HERE DATE HERE Review No.: 1 Source of article: David Sokol affair will tax Warren Buffet’s legendary sagacity The Guardian Online Author’s Name: D…
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Warren Buffett is a respected billionaire investor in the United States and major shareholder of Berkshire Hathaway, a multinational conglomerate financials and investment company. According to Buffett, “it takes 20 years to build a positive reputation and only five minutes to destroy it” (Rushe 2011, p.1). The article describes a black eye incident that has potentially damaged the credibility and reputation of Berkshire Hathaway amid a resignation scandal occurring on the back of questionable securities sales by an insider manager. The article insinuates that conversations between Buffett and David Sokol, an executive leader, provided insider trading knowledge to Sokol, leading to public and governmental scrutiny and investigation. Adding more enquiry to this situation is the fact that Sokol suddenly resigned from his position, which could indicate there is something to hide in the securities transactions in question. Personal Commentary Why is this relevant for risk management and ensuring reputational risk management for the organisation? For some organisations, the brand and its reputation in key target markets is one of the most fundamental competitive advantages sustained by the organisation. Especially true in saturated markets where public and private investments are traded in highly-publicised media, businesses require a differentiated brand name that is considered credible and adheres to the principles defined by corporate social responsibility. It is only when consumers become attached and loyal to a brand that they will begin expelling personal and social resources to supporting and defending the brand against negative criticism (Aron, Aron and Smollan 1992; Muniz and O’Guinn 2001). The situation involving Berkshire Hathaway reminds the risk management professional to carefully monitor and control the activities of internal staff members. Since this is an organisation that has much scrutiny by a variety of stakeholders and important shareholders, the organisation cannot afford for representatives of the business to damage brand reputation. According to the lectures, the brand reputation of a business should be considered just as paramount as traditional risk management activities. Farris et al. (2010) reminds us that the use of a customer satisfaction metric is a vital tool in monitoring business reputation and securing brand reputation. This article seems to reinforce the importance of showing transparency and accountability as part of corporate social responsibility especially when the internal activities and investment selections of a major holdings company can be observed by a global mass market audience. Under Kantian deontology, the highest good comes from duty. For example, a merchant attempts to build a good reputation simply to ensure profitability. However, this is not a moral good since it does not stem from social duty toward others (Bowie 1999). When assessing risks or establishing a risk evaluation tool, it is necessary to consider how the stakeholder and customer will view business actions. They will either attribute actions to moral and ethical behaviour or witness trust reduced in the corporate integrity of the business. Corporate social responsibility must be a major factor in setting up a risk management model to keep a positive reputation and avoid public scrutiny. Student’s Name: Review No.: 1 Source of article: Is your culture a risk factor? Business and Society Review 111(3) Author’
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