If numbers and calculations were all it took to be a good risk manager, computers would have taken over the job a long time ago. But as Rick Jones says in an article for CFO, “Risk management is about making choices in the environment of uncertainty,” a loaded statement which demands a human touch. There are no easy answers when it comes to decisions with widespread ramifications.
Jones poses a hypothetical scenario in which you are a small town’s risk manager and the nearby dam is about to burst. Circumstances allow that you can either evacuate half the people in town while the other half dies, or you can have everyone attempt to carve out a second evacuation route, which presents a 50/50 shot that everyone in town will either live or die. No amount of math will alleviate the gravity of a situation like that. That is why, in a corporate setting, Jones believes it is necessary to devise a set of behavioral standards by which everyone practices and abides. When there is a literal corporate edict to dictate how we should make decisions, it allows all the decision-makers involved to better understand and communicate with each other.
Five Codes of Ethics
Jones identifies five basic ethical approaches to decision-making that could be of use to your business:
- People’s rights
- Fairness or justice
- Common good
Each approach has clear and distinct merits. On the value of virtue ethics, Jones says:
This approach recognizes that even though humans are imperfect, we should strive to achieve certain ideals. It represents a moral compass to help improve behavior in a way that will achieve the fullest development of humanity. Virtues are attitudes and behaviors like honesty, courage, compassion, and integrity. In dealing with an ethical problem using the virtue principle, a relevant question is: What will promote my personal and community character development?
You can read the full article for more information on all the ethical approaches available to you: http://ww2.cfo.com/risk-management/2012/03/the-ethics-of-risk-management-no-easy-answers/