Research : Imbedding Ethics as a Risk Management Strategy - Thesis Proposal Example

II. Introduction The financial crisis that begun in 2007 that sent the US and the global economy into recession was attributed to the failure and/or absence of conventional risk management in anticipating and mitigating uncertainties in business (McShane et al 2011). Many pointed the failure of the conventional risk management to the disregard if not absence of ethical behavior among company executives whose emphasis was placed so much on its profit objective to the disregard of ethical business practice.

The case of Enron, Worldcom, Arthur Andersen, Parmalat and “the KPMG tax shelter fraud case in particular proves that the tax profession has not gone untainted in the age of accounting and corporate scandals (Sikka and Hampton 2005 qtd in Doyle et al 2009:177). These incidences magnified the importance of ethical practice in a business environment. These experiences tell that the disregard of ethics can undermine not only the company’s bottom line but its viability as a business entity. Thus, from a mere tool of improving Customer Relations Management and a norm of business propriety, business ethics can now be considered as risk management tool considering the threat it will pose to the company when disregarded.

The abovementioned companies set the example of the myriad of legal cases that the company could face and the loss of confidence that will ensue from its customers, investors and government regulators that a law was even created such as Sarbanes-Oxley Act (, 2009) to discourage unethical acts in business organizations. Ethics as a strategic risk management implement falls to the category of cultural risk that an organization has to contend with. Chitakornkijsil defined cultural risk as changes in the company culture and in the impact it generates in the economic system (the damage of some economic relationships because of different mentalities, traditions).

It is a risk associated with its human resource whose behavior can either contribute to the company’s growth and bottom line or pose as a risk as it deviates from the ideal behavior that is aligned to the company’s objectives (2010). Unlike other risks that company faces, cultural risk that is associated with unethical practice of a business’ human resource is difficult to quantify due to the abstract nature of behavior and the relativity of ethical standard as it relates to business. In addition, unethical business practices seemed to be beneficial in the short-term which explains why many companies became susceptible to unethical business practices.

Considering the number of companies that collapsed due to the prevalence of unethical business practices and the general public’s heightened disdain against it, it is obvious that unethical business practice has grown to a level of threat that could undermine a company’s bottom line and even collapse it. Yet, the study on how to successfully imbed ethics as a risk management strategy in an organization is not yet fully developed evident with the admission of several experts who conducted preliminary study about the subject.

In addition, the recent scandal involving Barclay’