FERMA 2003: social responsibility joins the risk menu

FERMA 2003: social responsibility joins the risk menu – up front

Graham Buck

European risk management is ready to tackle the issue of corporate social responsibility. But how many of Europe’s risk managers are prepared to confront it?

This was a leading question at October’s biannual Forum in Rome of the Federation of European Risk Management Associations. Its president, Thierry van Santen, put CSR nigh on the agenda this year. As he is to retain the post for a further two years–and van Santen is a pugnacious personality–FERMA is set to alert companies not already convinced of the need to give it nigh priority.

As van Santen observed, in 1999 when corporate governance appeared on the schedule, many questioned whether it deserved such prominence. Four years later, few risk managers still held such an attitude.

He believes the time has now arrived for equal importance to be attached to corporate social responsibility, particularly after the United Nations resolution passed in August–seen as a first step in regulating international businesses and their standards on human rights, labor and the environment. Its proposals will go to the U.N.’s full 53-nation Human Rights Commission in March 2004.

FERMA’s president stressed that a business that establishes itself as a “good corporate citizen” is more likely to retain customers’ loyalty and attract and retain good staff.

CSR is at the heart of this aim; a process enabling companies to follow a path of sustainable development, which also “meets the needs of present generations without affecting the ability of future generations to meet their own.”

As Forum session speaker Bernard Giraud, director of initiatives at France’s Groupe Danone, observed: “A company cannot act in isolation from the society around it. Both the public and the media now look to it to take a position on various issues. It must now attempt to address social problems such as poverty while still attempting to remain profitable.

“Blame is more readily pinned on a multinational than a small local firm and a major group that expands into other countries may be regarded by the local population as taking advantage.”

The main problem in adopting CSR policies is, as fellow speaker Nicole Notat, acknowledged, “social responsibility is not something very tangible and therefore not very easily assessed.”

Ms. Notat is chairman and chief executive of VIGEO, a European organization set up in August 2002 to assess and evaluate the social and environmental performance of businesses.

She argued that a company’s social rating would become increasingly important for its managers, stakeholders and investors alike.

“It’s the element of knowledge about a company that goes beyond the basis financial information, such as whether its products and services are sustainable. This assessment must be based on transparency.”

But opening up carries potential drawbacks. David Ney, risk consulting director for Willis Risk Solutions pointed out that many European companies were reluctant to put too much information into the public domain, fearing that more individuals would hold them accountable for perceived failures or shortcomings.

There was also the ironic, yet very real threat that communicating information about risk itself serves to create risk–in disclosing details that competitors can use and act upon.

“The big question is how much do you report and who do you report it to? There is not only a range of expectations, but also new penalties for putting information into the public domain if it isn’t released simultaneously.

“There is a danger of lapsing into the ‘boilerplate’ language used by United States companies in S-1 filings, where you list all prospective areas of risk without being too specific about any of them.”

One way forward may have been provided by France’s stock exchange regulator, which set out guidelines for large companies that wish to raise capital there. It sets out a total of 14 specific categories on which a company is required to provide information.

The proposals needed further revision, suggested Franck Baron, risk manager for Groupe Danone, but were a response to the need for stakeholders to obtain better quality information. “They at least avoid the U.S.-style prescriptive ‘tick the box’ approach,” he added, and could be the first step down a path that France’s neighbors might soon follow.

COPYRIGHT 2003 Axon Group

COPYRIGHT 2003 Gale Group