Risk management and business ethics: Integrating the human factor

Abstract

Risk is defined differently in different disciplines, its meaning sharing the uncertainty that is its essence. This chapter explores risk as an active verb, that is, what it means to take risk or to risk, and what it means to manage the risk taking of individuals within the modern corporation. Rather than the usual focus on the well-worn material of the processes and uses of risk measurement and assessment, we explore its ethical aspects, specifically, the conscious decision to take on risk, and its management through incentives that shape organizations' and individuals' focus on risk. There are ethical issues in risky business activities and risky aspects of business ethics. As business ethics is also a dimension of theories of leadership and human resources management, this article focuses on the ethical aspects of risk management, as outlined by business ethics. After a short introduction, there is a general overview of the different ethically relevant dimensions of risk in business (Sect. 2). Section 3 focuses specifically on management risks and risk assessment. Section 4 outlines the role of normative loopholes in risk management to frame our ethical perspective: order ethics. In Sect. 5 we discuss its relation to risk, specifically the way it deals with the human factor in organizations. Section 6 concludes by sketching a theoretical framework for what corporations can do to effectively manage ethical risks and fulfill their social responsibilities at the same time.