STUDENT NAMES:
IDS:
Adele Ewing
100317737
UNIT CODE * NAME
2014-OU3-BUS-60002 Sustainable Business Practices in a Dynamic Global Environment
ASSESSMENT TITLE
Assessment 2-Individual Report
TUTOR’S NAME:
Terry Landells
DATE OF SUBMISSION:
27 Oct 14
DECLARATION
We declare that ( the first four boxes must be completed for the assignment to be accepted): x This assignment does not contain any material that has previously been submitted for assessment at this or any other university. x This is an original piece of work and no part has been completed by any other student than those signed below. x We have read and understood the avoiding plagiarism guidelines at http://www.swinburne.edu.au/ltas/plagiarism/students.htm …show more content…
and no part of this work has been copied or paraphrased from any other source except where this has been clearly acknowledged in the body of the assignment and included in the reference list. x We have retained a copy of this assignment in the event of it becoming lost or damaged. x (optional) We agree to a copy of the assignment being retained as an exemplar for future students (subject to identifying details being removed).
Student acknowledgement (each member of the group must agree to the above before including their typed name below):
Date:
Adele Ewing
26 October 2014
DETAILS OF FEEDBACK
Office Use Only
Date Received
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Total Mark / Grade
Marker
Individual Report
1. Background
This report focuses on the analysis of sustainable business operations through the effective engagement of stakeholders of the multinational organisation, National Credit Insurance Brokers Pty Ltd (NCI). The firm was established in 1985 and specialises in credit insurance brokering (NCI, . Simply, credit insurance is insurance of money-owed to a company. As a brokering firm, the organisation seeks the best quotes from insurers offering this type of insurance. Due to the stringent requirements of this type of insurance, NCI provides support to its clients frequently as monthly reporting and declarations are compulsory. In effect, unlike other insurance industries, the insurance industry in which NCI operates in requires a large amount of servicing and monitoring on the part of NCI.
2. Issues
When considering stakeholder risks, organisations must take into account a range of risks including financial, ethical, legal and social. It is through the successful navigation of these risks that an organisation can obtain corporate sustainability, in effect, in order to achieve sustainable business processes, the organisation must provide ‘value to meet both short and long term interests of economic, ecological and societal stakeholders, and not only fulfilling the wealth creation aspirations of investors via addressing the needs of customer stakeholders’ (Swinburne University, 2014).
In the case of NCI, the issue of stakeholders is particularly interesting due to the nature of the business. The services provided by NCI can be considered an extension of its clients operations as NCI works to maintain the profitability and therefore the sustainability of its clients. By way of this, it can be surmised that NCI stakeholders go beyond the organisations own direct stakeholders but also include the stakeholders of its clients.
While this is an extension of traditional assumptions of corporate social responsibility, the idea still has merit. As a broker for another firm, and thus actively aiding the long-term profitability of its client, then the stakeholders of NCI’s client should also be considered stakeholders of NCI as they are affected by the actions and operations of NCI itself. Szekely and Knirsch (2005) support this idea by defining indirect stakeholders as all individuals and organisations within the company’s sphere of influence’.
Taking into consideration, the broad scope of stakeholders that NCI is presented with, the nature of risk is therefore broad as well. A particular issue of stakeholder risk arises when clients of NCI are involved in industries that manufacture products that have negative impacts on the consumer. While this naturally raises ethical risks for NCI’s client, as NCI is in essence a branch of this company, aiding its on-going profitability, this presents too, ethical risks to NCI- raising the question, is servicing and supporting companies that manufacture goods that negatively impact the health of individuals in society socially responsible?
The threat of the ethical risk identified above threatens NCI’s brand. This is best demonstrated through the hypothetical situation in which a client of NCI, say Philip Morris International Inc. (PMI) go into administration due to a bad credit decision, the company could receive a significant claim pay out as a result of the effective brokering of NCI and thus survive the loss. Through this hypothetical, the ethical risk - the negative impact PMI products have on consumer’s health; and the hypothetical outcome – that the service and support of NCI reduces the chances of this company ever going into administration the potential impact on NCI’s brand is apparent.
3. Recommendations
The most effective way to deal with this issue discussed is through the management of risk, whereby the identification, assessment and mitigation of a particular risk is facilitated. As stated by Beer and Foran (2000, p.39), “an increasingly important tool for management I the future, and management of the future”. This is no less the case in reference to NCI’s issue of ethical risk.
In order to effectively navigate this risk to NCI’s brand, the organisation must first identify where this issue would arise, as naturally it will be not be case with every client.
In accordance with Hillson and Murray Webster (2007), whose work determined a number of techniques for identifying risk, an effective way of identifying the risk presented to NCI in this case would be through the use of checklists, workshops and audits. These measures would enable employees of NCI to identity what potential and current clients could pose an ethical risk.
Following the identification of a risk, the assessment of it should naturally follow. While there are many flaws in the various ways risk is assessed, largely due to the issue of perception, there remain both qualitative and quantitative methods of measuring risk. Methods of risk assessment identified by Hubbard (2009, p.24-27) include expert intuition, expert audit, simple stratification methods, weighted scores and probabilistic models, all of which are recommended in the assessment of risk at …show more content…
NCI.
The final recommendation to effectively manage ethical risk at NCI is the mitigation of the risk. The mitigation of risk involves risk reduction either through the reduction of exposure or the reduction of the likelihood. In this specific case of ethical risk to NCI, scenario planning is recommended. According to Wack (1985) ‘scenarios help managers structure uncertainty when (1) they are based on a sound analysis of reality, and (2) they change the decision makers’ assumptions about…their mental model of reality’. Through scenario development, managers and executives are forced to consider the reality and perceive the future, thus reinforcing links between human factors, risk culture, and technical capability (Wack, 1985).
4.
Conclusion
To conclude, National Credit Insurance Brokers need to further develop their current sustainable business operations through a more effective stakeholder engagement as a way of mitigating risk. The ethical risk identified has the potential to threaten the NCI brand and consequently have associated financial impacts. In order to mitigate this risk, the organisation should consider and implement the recommendations outlined in this report.
References
Beer, T & Foran, B 2000, ‘Management for the Future: Risk Management, Future Options and Scenario Analysis’, in Risk Management and the Future, Beer, T (ed), Australian Minerals & Energy Environment Foundation, Melbourne, Aust.
Hillson, D & Murray-Webster, R 2007, Understanding and Managing Risk Attitude, 2nd Edition, Gower, England.
Hubbard, DW 2009, The Failure of Risk Management: Why It’s Broken and How to Fix It, John Wiley & Sons, NJ.
Swinburne University 2014, Learning Objective 1-5: Sources and management of risk, Swinburne University of Technology, viewed 22 October 2014
https://ilearn.swin.edu.au/bbcswebdav/pid-4338291-dt-content-rid-23443531_4/institution/lilydale_mcom/lmc501/LearningMaterials/L1-LOs/lmc501_lo1-5.htm.
Szekely, F & Knirsch, M 2005, Leadership and Corporate Responsibility: Metrics for Sustainable Corporate Performance, European School of Management and Technology, viewed 22 October 2014 http://www.esmt.org/fm/13/Working%20Paper_Metrics.pdf.
Wack, P 1985, ‘Scenarios: Unchartered waters ahead’, Harvard Business Review, September-October.