Ethics of Risk Management

Risk is inherent in business.   However, is every risk worth the good it could cause?   Dr. Chris MacDonald dissects this question as he explores the many reasons why risks need to be managed. MacDonald notes that, originally, risk management referred to the management of financial risks in the corporate world.  That being said, when it comes to corporate finances, not taking a risk is sometimes one of the biggest risks you can take.  There is no reward in not taking a risk:

“¦there's a kind of ambiguity in the very term “risk management.”  To the public, the idea of “managing” risks sounds very much like the idea of “reducing” risks.   And that, of course, sounds like a very good thing.   But risk management absolutely is not the same as risk reduction.   Indeed, it can be quite the opposite.   Risk management is the art of finding the right level and mix of risks, the right “˜risk profile.'   What matters ethically”¦is which risks are managed, by whom, by what means,   for whose benefit.

MacDonald also points out that risks to individuals are being handled by corporations. In this way, corporations are able to process morality and decide how to deal with their obligations. The greatest issue that MacDonald sees with all of this is that, since risk is based in outcomes, ethics don't always come into the picture.  As MacDonald says, “Not everything we care about ethically is a matter of outcomes.”  It may almost sound counter-intuitive, but corporate risk management can actually create new risks that need to be managed.

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