Risk Management in Business Cycles - Essay Example

RISK MANAGEMENT IN BUSINESS CYCLES Name: Institution: Date: Risk Management in Business Cycles Risk management is a process that entails understanding and controlling Risks that a business is exposed to in the process of endeavouring to attain its commercial goals. Risks are any latent occurrences that are capable of plunging a business or a corporate body into a situation that could cause harm to the business. Risk management requires that the leadership of an organization understands the nature of such occurrences and in cases where they could present a threat to the business environment, endeavouring to alleviate them in a positive way. This paper concerns the degree to which an obligation to respect human rights may be considered as existent or be lodged under the laws of Australia and how this entails a risk as well as how to manage such a risk under the corporate laws of Australia. Businesses are subject to various laws regarding their duty to domestic human rights in Australia which inevitably necessitate a corporate duty to respect human rights under specific situations. There are also outstanding industry processes that must be adhered to by businesses in order to meet common legal requirements when it comes to laws related to human rights or benchmarks. This, regardless of whether these outstanding processes or due diligence practices affix any consent of complying with human rights to businesses. Due diligence in the case of this paper is taken to mean the attentiveness that should be expected from and that which should under ordinary circumstances be exercised by a business that is seeking to gratify a legal prerequisite or fulfil a duty (Garner & Black 2011). In such circumstances then, processes of due diligence may well provide a way of integrating concerns related to human rights into its cycles of operations and legal conformity processes of business corporations. In this case, businesses would therefore have the ability to choose on the basis of an informed decision making platform the means by which they would meet this obligation to human rights if such a duty was to be incorporated into the domestic laws of Australia. Based on all of the above facts, this paper will present a general idea of the degree to which businesses are expected or may consider human rights when it comes to their legal duty in the subsequent perspective; a) Conformity with laws that carry obligations related to human rights; b) Taking on a plan and communications improvement impact consideration; c) Organizing for Public segment assessment when it comes to business activities; d) Observance of the duties of directors; e) Dealing with investor action including lawsuits; and f) Decisions related to investments However this paper states herein that this is not a comprehensive standard “human right and due diligence” and conformity agenda for businesses and that it is the duty of individual businesses to come up with their own agendas in relation to the subject at hand and the above activities in particular. Furthermore, the above business related activities are not all-inclusive when it comes to the spectrum of conditions under which businesses embark on due diligence processes in relation to human rights which are broad (Ramsay 2000). Other activities that may be crucial when dealing with the subject include; “Industry codes and standards compliance, situations of mergers and acquisitions and compliance with market established risk management processes such as those established by the Australian Stock Exchange. The above listed activities however offer a variety of due diligence processes for consideration when it comes to human rights on their own. Human Right Law Obligation for Businesses in Australia The obligation of corporate bodies to respect human rights exists in Australian laws whereby b businesses are expected to adhere to direct laws related to human rights. The practice of due diligence in relation to human rights in Australia is based on the following legal requirements; The Commonwealth Constitution of Australia Act 1900 (under the constitution) – This Act carries specific warranties relating to a specific number of articulate rights which the court recently declared as possible to combine with additional rights and freedoms from within the constitution. However, these rights are inadequate when it comes to corporations because they speak about the conduct of the Commonwealth and States and in that case do not apply to corporations (Schweizer Kobras 2011). Australia has no federal bill of rights but it has two state authorities dedicated to human rights laws but both have restrictions as far as businesses are concerned namely; Businesses are in addition exposed to duties that arise from within centralized parliamentary mechanisms that relate to human right, this include for instance rights related to workplace rights, the environment and those against unfair treatment in the workplace (Harris et al 2011). In addition to these, “the Criminal Code Act 1995 (Cth)” is also applicable to businesses including the requirements of the “Rome Statute ICC which it integrates (also known as the Rome Statute)” (Allens Arthur Robinson 2008). Dedicated Human Rights Victoria has, “the Charter of Human Rights and Responsibilities Act of 2006 (Vic) (the Charter)”, which enforces responsibilities related to human rights on public establishments that are a replica of the rights that the “International Covenant on Civil and Political Rights” carries. Sub-division 38 (1) of the Charter particularly declares any act by a “public authority” that is in contravention of human rights and any decision that does not recognize significant human rights unlawful (State of Victoria 2006). “Public establishments” are therein identified as inclusive of any unit instituted by a statutory stipulation whose roles comprise or are inclusive of public disposition in implementing them on “behalf of the State or public authority (whether contractual or otherwise)” (State of Victoria 2006). In respect to this, many corporations in Victoria that carry out duties that were conventionally executed by the State or that are carrying out duties on behalf of the State by contractual means are expected to adhere to requirements compelled on public establishments under the Charter. Under the “Australian Capital Territory, the human rights Amendment Bill 2007 Act” also sought in 2011 to bring in stipulations that are comparable to those of the Charter in nature on public establishments into the “Human Rights Act of 2004”. The definition of Public Establishments in this amendment is however broader and carries a long list of establishments deemed to be of a “public establishment” nature and many of which falls under the jurisdiction of “Corporations/Businesses”. They include; “the supply of water and electricity energy, emergency services provision, public health services, public education, public transport, Public housing, etc” (Australian Capital Territory 2012). Additional Laws enforcing duties related to Human rights on businesses Australia There is a broad assortment of domestic Australian laws that defend a variety of globally acknowledged human rights especially in areas of “equal opportunities to all, prejudice and employment”. One such law, “the Workplace Relations Act of 1996 (Cth)” for instance professes to protecting human rights such as those of ILO, as well as of other well known human rights organizations across the world. The Act caries such provisions as those that forbid the termination of a person’s service based on “gender, race, disability, age, religious conviction, being expectant, partisanship as “trade unions memberships” and political views”, etc (Government of Australia (A) 2006). “the racial discrimination Act of 1975” as well as the Sex Discrimination Act of 1984 also enforce rights that are associated with corporations/business practices which might be a source of limitation to human rights. All companies that operate within Australia and specifically those that operate in the field of income and capital are also affected by these legislation when it comes to aboriginal land. “The native Title Act of 1993 (Cth)” specifically holds in high esteenm the “right to self-determination for the protecting the rights of the indigenous groups in Australia to own the resident designation of their customary land. Corporations/Businesses/Compnies are therefore required as a must by this Act to consider the consequences of this Act when using land that has a native title for their projects (Government of Australia (B) 2006). “The Privacy Act of 1988 (Cth)” expanded its mandate and it now covers the private commercial segment in protecting the rights of individuals in relation to the invasion ot the privacy of such individuals by corporate bodies. If a person believes that their right to privacy whether of information or otherwise has been interfered with, they can now report to the “Privacy Comminssioner”. In addition to all the above, the Federal Government of Australia including Parliament has also instituted environmentl laws that have given rise to various constitutional directives that corporations/businesses must adhere to when it comes to the environment, protection and wellbeing. This paper need not insist that pocecesses due diligence connect with these duties. The scope of this paper does not allow for a complete analysis of the entire law system of Australia that has implications on corporate bodies in relation to the subject at hand,. However it is woth noting that the “Australian Criminal CodeAct of 1995 has adirect implication on corporations specifically part 2.5 which expands the legal responsibility of any offences covered therein to corporate bodies. The ICC “Consequential Amendment” Act of 2002 does the same when it comes to crimes against humanity including “genocide and war crimes”. Companies however own the onus of prove under this law to express their intentions by exhibiting that they do own a culture that directs, encourages, tolerates or on the other hand one which led to non-conformity with the appropriate stipulation (Government of Australia (C) 2005). Corporate bodies therefore need to ensure that they have a program of due diligence in place intended at making certain that there is conformity with human rightswithin its jurisdiction as this will be very useful in counterring any accountability associated to offences in the Criminal Code. Venture investments and Infrastructure growth evaluation In a variety of circumstances both domestic and international, Australian law necessitates that businesses should acquire the authorization of the government in order todev be able to engage in funded projects such as those related to finance and infrastructure. Mostly, the authorization has conditions attached to it depending on the ecological or societal effects that it may have depending on the information that the company provides as well as the intern al policies and the relevant legal criterion. Examples of these impact evaluation measures are commonwealth based and they include; the “the environment protection and biodiversity conservation (EPBC) Act of 1999 (Cth)” which requires that the consent of the Minister of environment and Heritage should be sought for projects that may have an impact on acknowledged heritage sites, the Mining Act of 1992 which relates to the considerations by the relevant ministry of “aboroginal, architectural, archaeological historical of geological interests ”, and the Gaming Machine Act of 2004 which stipulates that the licensing of machinery for activities relating to the gaming and racing contests should include a societal impact evaluation It is important for corporations to put into considerations that due diligence might also apply to these latter laws especially when their impact on human rights is brought into the equation Direct requirements for consideration of human rights by Businesses There are few instances of where legal impact assessment duties directly necessitate the consideration of human rights. The Export Finance and Insurance Corporation Act 1991 (Cth) however necessitates that the “Australian Export Finance and Insurance Corporation” should consider such obligations as is necessitated by Australian law under nternational agreements. The Act also requires that all corporations in Victoria whose role is broad enough to warrant being condidered as “public establishments” and which would therefore attract the regulations of the charter should act in accordance with the human rights regulations stipulated in the charter. The same applies to governmental establishments when it comes to infrastructure and development projects Capacity for additional contemplation of Human Rights As much as the existence of direct requirement for consideration of human rights by corporate bodies is minimal when it comes to the perspective of impact evaluation, there is potential that the perception of human rights might be able to influnece the decision making platform greatly. Complaint mechanisms for the public concerning corporate human rights impacts The government of Australia has put in place various mechanisms through which parties can raise their concerns with corporations as well as search for improvements as far as compliance with human rights are concerned. For instance, being a party to “OECD Guidelines for Multi-National Enterprises”, which is a policy for businesses that is meant to enhance rather than override the nationwide lawful structure, Australia has been mandated to form a a National Contact Point (NCP) for OECD Guidelines to play the role of a round-table for dialogue and add to resolution of matters concerning how the OECD policies rae carried out and among these are human rights concerns. Other mechanisms through which parties can loge complaints on human rights concerning busienesses include; “the complaint mechanism of the Human Rights Equal opportunity Commission (HREOC), a commissionn that is mandated with the responsibility of hearing and probing in to accusation made against corporate bodies that fall under five anti-prejudice laws namely; “the racial discrimination Act of 1975, the sex discrimination Act of 1984, the Disability discrimination Act of 1992, the Aged Discrimination Act of 2004 and any allegations related to contraventions of humans rights as they are carried in the Human Rights and Equal Opportunity Commission Act 1986 (Cth)” (Allens et al 2008). The commission looks into discrimination cases involving race, color, ethnicity, racial denigration, gender, sexual abuse marital status, expectancy and disability (Allens Arthur Robinson 2008). Businesses should therefore come up with ways of establishing means by which they can uphold human rights. Tey should also seek to uphold due diligence as required in matters pertaining to conformity and risks. This will assist them in avoiding and acting in response to any complaints The Duties of Directors Directors are not subject to any specific legal obligation under Australian law regarding the issue, but they have been provided with a capacity in the corporations laws of Australia to consider human rights issues with regar to their general duty of care as leaders. Directors are also bound by the “Corporations Act 2001 (Cth)” to a certain extend since it is partly related to their general duty of care. Below is a list of some of them; The obligation to perform their duties with devotion or in “good faith” to all; The obligation of “Care and Diligence” which is covered under the 2001 “section 180 (2) of the Corporations Act” (Government of Australia (C) 2005). The same Act also covers the “Business Judgement Rule” in section 180 (2) which say that a diretor must exercise their duty in consideration of their care and skill under section 180 (1) of “inter alia” which directs that a director should use his rational capacity to judge whether his/her actions are in best interest of the corporation. Accounting and hazard evaluation- the accountability or reporting requirement was recentlly introduced to make available a possibility for corporations/businesses to enlighten the marketplace and extensive stakeholder component of the organization’s routine and risk report that is not related to money. The impact of Human rights could be of some significant assistance when it comes to the process because they too can affect the routine and /or risk report of a corporation. Dealings with Shareholders The corporations Act of Australian has several provisions for businesses regarding human rights and how they can uphold them. Theyinclude proposals of resoulutions mechanisms, general meetings obligations and shareholder legal actions. The three have a great impact and are capable of costing an organization both financially and image wise. Corporations should therefore ensure that they condider the ways through which human rights can impact their processes of due diligence for them to be able to evaluate and manage risk related to human right and make the essential inclusions. Shareholder campaigns on human rights agenda Shareholders have many ways of getting the attention of the public on alleged human rights impacts in the effort to make corporations comply and amplify their concern about human rights. According to the corporations Act of 2001, one such way is by a hundred such shareholders holding a General Meeting and moving a motion and having materials distributed to sustain the motion or to be in opposition to a resolution passed by a board of a corporation. Another way is by applying for a bizarre general meeting and a third way is by asking questions at a general meeting. In any case where a corporation fails to provide information to the market regarding the effects that the corporation’s activities have on human rights and such a failure causes any kind of loss to shareholders, t he shareholders can in conjecture bring accusations against the corporation to recuperate the loss. Decisions about investments The idea of corporations respecting human rights is appropriate to decisions about investments in Australia in two major ways namely; “Social responsible investments (SRIS)” and/or “Environmental social governance (ESG)” dynamics and the lawful obligation for purveyors of monetary products. The second dynamic is however depended on a venture factor aimed at unveiling SRI and ESG factors involved in creating, retaining and achieving the venture. The human rights factor in this case comes in because due process would have to be involved if a purveyor was to announce an intent to consider SRI and ESG factors in the matter of decision making. Duties of organizational investors The main types of organizational or institutional investors in Australia are; supervised venture capital schemes, life assurance and superannuation subsidies and even though the three are seeparately regulated each by its own legislation, the legal duties imposed on them by government are the same. They regard “due care, skill and diligence” in dealing with investments. In effect to this, investors are required to uphold the interests of members higher than their own interests. On e would be forgiven to think that the above duties do not require human rights considerations. However, the regulations that govern these bodies require that the bodies must make the most profits for their members when it comes to SRI and ESG aspects and in a case where an investor refuses to make the most profits or investt in a bigger venture on behalf of the member, on the basis of human right and/or SRI and ESG aspects, then the corporate body could be found to be in contravention of that duty and claims of breach of “care, skill and diligence” could be laid against the body (Allens Arthur Robinson 2008). Supperannuations based corporations are also faced with another restriction namely; section 62 of the Superannuation industry Act of 1993 which states that superannuation funds should be run for the solitary rationale of benefitting their members (Government of Australia Productivity Commission 2001). This is a barrier when it comes to achieving human rights in investments however it has been argued that “rationale” should be taken to mean the goal as opposed to means of achieving that goal and in this case therefore human rights would not be excluded Exposé duties “financial investment” product purveyors Sellers of financial products are required by law in Australia to give their purveyors a “Product Disclosure Statement (PDS)”. Details are carried in Section 1013D of the Corporations Act which also carries guidelines on how matters of ecological societal and moral should be treated under laws of labor in an investment element with regard to selecting, retaining and realising the investment (Government of Australia (D) 2005). If a corporation does not act in accordance with this section, then it may face “criminal or civil sanction or both” (Allens Arthur Robinson 2008). Guidelines regarding this section have been published by the Australian Security and Investment Commission. Corporation face the danger of this section of the corporations act and a greater risk would be involved if limited or inadequate revelation is made. Conclusion The above legal duties are in regard to respect of human rights by businesses Businesses are required to adhere to these laws as long as they determine or relate with their activities The failure to observe human rights could lead to unfavorable consequences for businesses In the case of the duties of directors, shareholder relations and decision making when it comes to investement, human rights should not be overlooked but they do not constitute any legal duties as far as corporate respect for human rights are concerned The above is not a program that corporate oorganizations could adopt. List of References Allens Arthur Robinson, 2008, Corporate Duty and Human Rights Under Australian Law, Sydney: AAR. Australian Capital Territory, 2012, The Legislative Assembly for the Australian Capital Territory, Canberra: Parliamentary Council of Australia. Garner, B, & Black, H, 2011, Black's Law Dictionary, St. Paul, MN: Thomson Reuters. Government of Australia (B), 2006, Native Title Act 1993 Act No. 110 of 1993 as amended, Canberra: Government of Australia. Government of Australia (D) 2005, Corporations Act 2001 Act No. 50 of 2001 as amended,Canberra: Government of Australia. Government of Australia Productivity Commission, 2001, Review of the Superannuation Industry (Supervision) Act 1993 and Certain Other Supperannuation Legislation Inquiry Report No. 18. Melbourne: Media and Publications Productivity Commission. Government of Australia, 2006 (A), Workplace Relations Act 1996 Act No. 86 of 1988 as amended. Canberra: Government of Australia. Government of Australia, C), 2005, Criminal Code Act 1995 Act No. 12 of 1995 as amended, Canberra: Government of Australia. Harris, J, Hargovan, , & Adams, M, 2011, Australian Corporate Law, Chatswood: LexisNexis Butterworths. Ramsay, I, 2000, Corporate Law. Melbourne: Corporate Law Teachers Association University of Melbourne. Schweizer Kobras, 2011, Corporate Law. Sydney: Schweizer Kobras Lawyers & Notaries. State of Victoria, 2006, Charter of Human Rights and Responsibilities Act 2006, Victoria: State of Victoria. Read More