We examine the relationships among religious governance, especially Islamic governance quality (IGQ), national governance quality (NGQ), and risk management and disclosure practices (RDPs), and consequently ascertain whether NGQ has a moderating influence on the IGQ–RDPs nexus. Using one of the largest data sets relating to Islamic banks from 10 Middle East and North Africa (MENA) countries from 2006 to 2013, our findings are threefold. First, we find that RDPs are higher in banks with higher IGQ. Second, we find (...) that RDPs are higher in banks from countries with higher NGQ. Finally, we find that NGQ has a moderating effect on the IGQ–RDPs nexus. Our findings are robust to alternative RDP measures and estimation techniques. These results imply that the quality of disclosure depends on the nature of the macro-social-level factors, such as religion that have remained largely unexplored in business and society research, and, therefore, have important implications for policy makers. (shrink)

While corporate failures, such as Enron and WorldCom, have focused attention on issues of business ethics, corporate governance and risk management, there is nothing intrinsically new in the reasons behind their collapse. Neither is there anything fresh in the media's rush to identify a scapegoat. An examination of the financial collapse of Mirror Group Newspapers and Barings Bank, demonstrates failures within both these companies' corporate cultures and management systems, which allowed, if not encouraged, unethical behaviour by (...) key individuals. It is argued that a combination of legislation, regulation, effective risk management and appropriate sanctions are needed, if such unethical behaviour, and resulting corporate failure, is to be prevented in future. (shrink)

ESG-transformation is taking place in all areas of the economy. Banks must become examples and guides in conducting business in an environmentally, socially and governance manner. The purpose of the study is to substantiate the need to determine the correct course and implement the principles of ESG-banking, including in the practice of risk management of commercial banks, taking into account the long-term consequences of today's actions for global economic and natural systems. Scientific novelty lies in the development of (...) incentive measures and support for ESG-banking, taking into account the analysis of world experience. As a result, the validity of the introduction of ESG-banking and ESG-risk management, their impact on increasing stability in the country's economic sector has been proved. The article identifies the limitations that are most relevant for the Russian market due to the novelty of the ESG-concept in the domestic banking sector. (shrink)

This very short paper highlights some of my recent and forthcoming work on “good epistemic practices” in the financial services industry. It identifies some epistemic dimensions of risk management in banking and illustrates how managing for good epistemic practices might be helpful.

This volume explores various aspects of risk taking. It offers an analysis of financial, entrepreneurial and social risks, as well as a discussion of the ethical implications of empirical findings. The main issues examined in the book are the financial crisis and its implications for business ethics. The book discusses unethical behaviour as a reputational risk (e.g., in the case of Goldman Sachs) and the question is raised as to what extent the financial crisis has changed the banks’ (...) entrepreneurial strategy. The book presents an analysis of the reasons leading to the crisis and identifies them as ethical dilemma structures. In addition, it looks at general questions regarding ethical behaviour and risk taking, such as: To what extent does the social embeddedness or abstraction play a role in guaranteeing ethical behaviour? What conclusions can be drawn from institutional or evolutionary perspectives on risk management? Finally, the book discusses further issues that become factors of risk within and between societies, such as work insecurity, corruption or the problem of facilitation payments as a risk in international transactions. (shrink)

This article examines the epistemology of risk assessment in the context of financial modelling for the purposes of making loan underwriting decisions. A financing request for a company in the paper and pulp industry is considered in some detail. The paper and pulp industry was chosen because it is subject to some specific risks that have been identified and studied by bankers, investors and managers of paper and pulp companies and certain features of the industry enable analysts to quantify (...) the impact of specific risk events of a given dimension on a company's future financial performance. While companies in other industries may be subject to similar risk factors, the impact of risk events may be more difficult to gauge in those industries. The ability of financial analysts to model the impact of a risk event, and hence quantify a credit risk, increases the predictive accuracy of the model. I argue that bankers and regulators should recognise the uncertainty associated with unquantifiable credit risk in financial models, and they should view this uncertainty as a credit risk factor in and of itself. Evaluating the relative degree to which credit risk is quantifiable in financial models is a potentially significant yet largely unrecognised tool for credit risk management. I consider some possible applications of this assessment tool for managing risk within the banking industry. (shrink)

The widespread and elaborate use of new financial instruments among corporate entities and financial institutions requires justification. It faces the charge of increasing both the level and complexity of risk in the financial system under the pretext of reducing it. It is a prodigious user of management resources and IT. It obscures the integrity of the nature of the non-financial user.It is not mere academic argument to question the ethics of certain instruments. Both in the US and the (...) UK certain forms of financial instrument are deemed too risky to be used by all and sundry. Other forms of instrument may be banned outright, even though many financial professionals will be perfectly capable of measuring the risk involved. The force of this attack is recognized in the financial industry. One defence frequently put forward is similar to that of the National Rifle Association in the US about guns. It is the users, not the product, that are the problem. “One misconception is that derivatives are risky instruments that are used for speculation. It is more accurate to say that derivatives are instruments that can be used to alter risk profiles”. The mere fact of an instrument existing is no reason to use it. The biggest advocates of exotic options are bankers. Practising Treasurers spend much time seeking to distinguish between the fascinating idea which the bank’s rocket scientist wants to try, and the derivative that will genuinely benefit the company. The fact that many of these instruments are harmful or spurious does not mean they should be banned, but neither does the absence of a ban make them ethical.The ethical question to ask for the non-financial corporation has to do with the proper balance of courage and prudence. Will this instrument enable the company to carry out its proper task with more focus and self-awareness, or is it an attempt to neutralize the proper risks that we are paid to take? For financial corporations the inevitable presence of derivatives poses two issues. First, are they intrinsically valuable or simply so complicated that no client could use them and monitor the new exposures involved? Secondly, will the active management of our positions created by this activity result in a change in the nature of our business, and if so, has this been clearly communicated to the world around?On reading this again I am once more struck by a remark made to me by a clergyman long before I was ordained. “What is an ethical Treasurer?” One of the major challenges in the field of financial ethics is the development of an adequate, and clearly communicated, measure of the intrinsic ethics of finance.This paper is not arguing that derivatives are wrong, but that they are powerful, and power needs monitoring and controlling. The events of October 1987 are often referred to as the meltdown of the markets. My clear memory is of the whole executive board of directors standing in my office gazing in awe at a Topic Screen as waves of red chased across the screen. The use of nuclear metaphors was apt. A system that seemed safe had assumed a life of its own. There is little doubt that derivatives fuelled the reaction. (shrink)

The financial crisis that began in the US real-estate market in 2007 and culminated in a global economic slump showed bluntly how wrong financial risk models can be. This state of affairs has triggered a number of reactions and observations at the level of the specification and use of models and at a more conceptual/fundamental level. This article focuses on the epistemic features of such models – namely the nature, source, conditions of validity, structure and limits of the knowledge (...) that ‘well-specified’ models generate – so as to assess models in a balanced way, giving due weight to the fundamental determinants of their output and warning against overestimation of their possibilities; clarify the conditions under which models can be validly applied to economic and social relationships; render intelligible why the degree of accuracy that successful models would require is intrinsically unattainable; better understand models’ failure as evidenced by the crisis; and comment on the policy steps being undertaken to prevent similar financial crisis in the future. The analysis applies the principal tenets of critical realism to the daily preoccupations of risk management professionals and financial regulators alike. It is not intended as an intervention into critical realism. It draws on the works of Tony Lawson and Roy Bhaskar, and revisits relevant aspects of John Maynard Keynes’s work, connecting dots amongst them and marrying economic and philosophical analysis with day-to-day financial risk management and regulatory issues. Content Type Journal Article Category Article Pages 462-486 DOI 10.1558/jcr.v11i4.462 Authors Mattia L. Rattaggi, UBS/Cambridge Social Ontology Group Journal Journal of Critical Realism Online ISSN 1572-5138 Print ISSN 1476-7430 Journal Volume Volume 11 Journal Issue Volume 11, Number 4 / 2012. (shrink)

This extended editorial takes stock of the first volume of the journal Ethics and Social Welfare, offering an overview of the types of contributions in the first four issues and suggesting future themes. A critical summary is given of the contributions so far, which have included: moral philosophical theorizing; analysis of key ethical concepts; exploration of contested areas of policy and practice; empirical studies of living conditions, perceptions, attitudes and professional interventions; accounts of ethical issues in practice; ethical issues in (...) research; and models of professional ethical decision making. Themes identified for future consideration include: service user perspectives on aspects of social welfare practice; development of practice-based ethical theories for the social welfare professions; ideas about teaching professional and practical ethics; ethical issues in managing and distributing resources; critical analysis of the ethical implications of public policies; further contributions offering moral, political and social philosophical perspectives on issues of social justice, cultural diversity, global and local policies for tackling environmental and humanitarian crises. (shrink)

This article investigates the nexus between bank-specific risks and the financial stability of the banks for a panel data set of 15 scheduled banks in Pakistan over a 12-year period from 2009 to 2020. Using the fixed-effect model, the study result shows that bank-specific risks, i.e., credit risk and liquidity risk are detrimental to bank stability, whereas funding risk has no significant impact on bank stability. Besides these, bank size has also a (...) negative impact on bank stability, whereas the return on assets revealed a positive influence. To ensure stability, bank management should establish policies that confirm secure loan granting and timely reimbursement from customers to minimize the credit risk. Besides this, management should keenly observe the liquidity position and should also effectively mobilize the customer deposits to attain financial stability. (shrink)

Every educational system requires some kind of management and control. This is particularly true in the case of occupational education and dual apprenticeship. Nevertheless, the didactical value and the overall success of such kind of educational systems can vary considerably. Any educational system, any system of apprenticeship requires either some kind of coordination or some kind of co-operation. In Germany, despite the fact that there is a lot of rumors about the importance of cooperation for over a decade by (...) now, the well-known dual system of vocational education is firmly grounded on the management principle of co-ordination. The control of the system ‘by plans’ apparently has proved to be the most adequate approach to its organization and management structures. Starting from the idea of a duality which is characterized by its didactical dimension, the set of qualities needed for this purpose can be illustrated by following the logic of different didactical approaches in vocational education. (shrink)

This article tries to seek a solution to the problem of NPA in the small scale industries under the present circumstances of banking and insurance working together under the same roof. What is stressed in this article is the pressing need of the small-scale entrepreneur for becoming aware and educated in modern business management holding a professional attitude toward rational decision-making and banks have to facilitate that process as a part of the credit policy sold by them.

Contemporary hormonal therapy for the menopause has its conceptual origins in the ancient tradition of organotherapy. The popular but pharmacologically inactive precursors of hormonal therapy were developed as part of a resurgence of interest in organotherapy in the 19th century, which coincided with increasing medicalization of the menopause and the view that the ovaries were responsible for the ‘feminine’ identity and wellbeing of women. The subsequent chemical identification of oestrogens allowed the development of pharmacologically active hormonal therapy for the menopause, (...) which was probably first used clinically in the late 1920s. Around this time, emphasis shifted from the ovaries to oestrogen as being responsible for femininity and health, with the menopause and ageing increasingly defined as oestrogen deficiency diseases. Hormonal therapy for the menopause was first used predominantly for women who had a premature menopause. In the 1960s, universal prescription was increasingly promoted as a way of preventing diseases of later life and the perceived ‘defeminization’ of women by menopause. Scientific evidence regarding the risks and benefits of hormonal therapy for the menopause has been accruing over the last 70 years; its interpretation has been affected by background beliefs regarding the effects of oestrogen and the menopause on women. (shrink)

This paper comprises a case study illustrating ethical and practical challenges for a Ugandan hospital-based social worker early in the COVID-19 pandemic, followed by a commentary. The hospital was under-resourced, with staff and patients experiencing lack of information and panic. The social worker, Denis Adia, recounts his responses to new and ethically challenging situations, including persuading Muslim patients to stop fasting for the good of their health; deciding to keep a baby in hospital with parents although this was against the (...) rules; and supporting a stigmatised former patient in the face of intimidation by colleagues. He reflects on the importance of recognising each person’s unique needs and circumstances, seeing this as a vital role for social workers. The case is followed by a commentary from a UK academic (Sarah Banks), who notes the cognitive and emotional effort (‘ethics work’) undertaken by the social worker to: see the ethical aspects of particular situations; take account of patients’ specific needs; ensure they are treated with respect; promote their well-being; and perform as a good social worker. Banks draws attention to the key role of the virtue of courage in pandemic conditions, which involves working with new risks and facing fears with confidence. (shrink)

Using an international sample of banks, we study how differences in religiosity across countries affect earnings management. Given that religiosity is a major source of morality and ethical behavior, it may reduce excessive risk taking and act as deterrence for earnings manipulations. Therefore, we predict lower earnings management in societies that have higher religiosity. Consistent with expectations, our cross-country analysis indicates that religiosity is negatively related to income-increasing earnings management for loss-avoidance and just-meeting-or-beating prior year’s earnings. (...) We also find that religiosity reduces income-increasing earnings management through abnormal loan loss provisions. In additional tests, we document that religiosity increases the information value of bank earnings, with both earnings persistence and cash flow predictability being enhanced by higher religiosity. For the crisis period analysis, our evidence shows that banks in countries with higher religiosity exhibit lower probability of reporting asset deterioration and lower probability of having poor performance. (shrink)

ABSTRACTPresenting information in a coherent fashion has been shown to increase processing fluency, which in turn influences affective responses. The pattern of responses have been explained by two...

This case study focuses on some of the ethical issues that arise in community-based participatory research, drawing on an example from practice in the UK. It comprises a case example written by a community researcher, followed by two commentaries, which analyse the case and offer different perspectives on the issues raised from the commentators' experiences in Aotearoa New Zealand and Australia. The case example highlights the challenges faced by volunteer action researchers undertaking research interviews and mentoring on sensitive topics in (...) their local neighbourhoods. It raises questions about: the emotional effects of discussing matters of mental health, well-being and money management on both researchers and research participants; how much researchers should disclose about their own lives; and the nature of the support needs of volunteer community researchers. (shrink)

Responsible risk management is central to banking ethics. With the 1999 publication of the Basel Committee's proposal, Basel II, for a New Capital Accord to replace the 1988 agreement, Basel I, an attempt has been made to address the problem of correlating banks' risk management with their capital requirements. The Basel II framework, finalised in June 2004, is designed to improve risk management by using models based on past performance to help set the amount (...) of capital banks are required to hold by regulators, with the purpose of improving the efficiency of capital allocation. The objectives of this study are to investigate how banks generally, but particularly those located in China, could improve their risk management systems and what the implications of these new regulations are for them. Three relevant propositions were formulated, namely, Basel II will improve risk management; Basel II will improve capital allocation efficiency; and compliance with advanced risk management systems is biased in favour of the large banks. Evidence was assembled with which to evaluate these three propositions by gathering relevant primary data by means of a representative survey of Chinese banking executives involved in risk management. The findings strongly support the first two of the above propositions and partly support the third proposition. (shrink)

Banks play a unique role in society. They not only maximize profits but also consider the interests of stakeholders. We investigate whether banks consider firms’ pollution records in their lending decisions. The evidence shows that banks offer significantly higher loan spreads, higher total borrowing costs, shorter loan maturities, and greater collateral to firms with higher levels of chemical pollution. The costly effects are stronger for borrowers with greater risk and weaker corporate governance. Further, the results show that banks with (...) higher social responsibility account for their borrowers’ environmental performance and charge higher loan spreads to those with poor performance. These results support the idea that banks with higher social responsibility can promote the practice of business ethics in firms. (shrink)

Pancreatitis is a complex, progressively destructive inflammatory disorder. Alcohol was long thought to be the primary causative agent, but genetic contributions have been of interest since the discovery that rare PRSS1, CFTR and SPINK1 variants were associated with pancreatitis risk. We now report two associations at genome-wide significance identified and replicated at PRSS1-PRSS2 and X-linked CLDN2 through a two-stage genome-wide study. The PRSS1 variant likely affects disease susceptibility by altering expression of the primary trypsinogen gene. The CLDN2 risk (...) allele is associated with atypical localization of claudin-2 in pancreatic acinar cells. The homozygous CLDN2 genotype confers the greatest risk, and its alleles interact with alcohol consumption to amplify risk. These results could partially explain the high frequency of alcohol-related pancreatitis in men. © 2012 Nature America, Inc. All rights reserved. (shrink)

As the economy has grown increasingly financialized, the relationship between financial innovation and instability has attracted more attention. Previous research finds that the proliferation of complex financial innovations, like asset securitization and new financial derivatives, helped to erode the market governance arrangements that kept excessive bank risk-taking in check, inviting instability. This article presents an alternative way of understanding how financial innovations and market governance arrangements combine to shape instability. Market governance arrangements also shape how financial firmsreceiveinnovations, leading (...) to greater or lesser instability at particular times and places. I illustrate this argument by tracing the effects of changing corporate governance arrangements at large US banks in the 1990s and 2000s. Like non-financial firms in the preceding decade, banks adopted reforms associated with the shareholder value model of corporate governance. These changes to internal bank governance arrangements affected the agendas of bank executives in ways that encouraged expanded use of securitization and derivatives. Drawing from this case, I argue that a full understanding of instability in the financialized era requires closer attention to the (institutionally-structured) interests of financial innovationusers—not just to features of financial innovations themselves. (shrink)

Intellectual contribution in the form of authorship is a fundamental component of the academic career. While research has addressed questionable and harmful authorship practices, there has largely been no discussion of how U.S. academic institutions interpret and potentially mitigate such practices through the use of institution-level authorship policies. To gain a better understanding of the role of U.S. academic institutions in authorship practices, we conducted a systematic review of publicly available authorship policies for U.S. doctoral institutions, focusing on components such (...) as specification of authorship criteria, recommendations for discussing authorship, dispute resolution processes, and guidance for faculty-student collaborations. We found that only 24% of the 266 Carnegie R1 and R2 Universities had publicly available authorship policies. Within these policies, the majority specified criteria for authorship, but provided less guidance about actual processes for applying such criteria, handling authorship disputes, and managing faculty-student author teams. Further, we found that any discussion of dispute resolution practices typically lacked specificity. Recommendations grounded in these findings are offered for institutions to leverage their ability to guide the authorship process by adopting an authorship policy that acknowledges disciplinary diversity while still offering substantive guidance. (shrink)

In this article we consider an argument put forth by Selgin in support of the claim that there exists a mechanism for limiting coordinated expansions of fiduciary media under a system of fractional reserve free banking. Selgin argues that such banks hold risk-adjusted reserves against expected losses, and even if the expectation of reserve losses remains zero, the variance of such losses increases under an in-concert expansion . It is this increased variability that is claimed to act as a (...) brake on the expansion. We take issue with this argument on the basis of the fact that such a characterization of observed clearings would require that characteristics of the underlying data-generating process be obtainable from pathwise realizations of that process. In other words, there is an implicit assumption of stationarity in Selgin’s argument, and this assumption is at odds with well-known empirical facts of non-stationarity associated with most economic time series. We also point out ways in which techniques of risk management commonly found in the modern financial industry are unlikely to be effective in addressing this problem. (shrink)

This study integrates institutional theory and social cognitive theory to describe how peripheral organizations can accidentally bring about radical change even in highly institutionalized and change-resistant fields. The empirical context is the field of banking in Ireland (1995–2001), where a peripheral bank triggered a shift away from traditionally conservative and risk-averse banking values toward aggressive values of entrepreneurial risk taking. The introduction of a new approach to banking was attributed to three factors: (1) a benevolent environment, which (...) made this innovation feasible and timely, (2) the state of the field, which had gaps that could be addressed through specialization, and (3) prior successes, which created hubris in the senior managers, thereby increasing the pace and scope of adoption of this approach. Eventually, what started as a specialized and entrepreneurial approach led to the spread of a risky approach to banking across the entire field. The study highlights the risks of hubris, in that media praise and early successes can increase the pace of adoption of innovations which offer short-term gains but are detrimental in the long term. (shrink)

Previous work has shown that concerns of breast cancer patients after finishing radiotherapy are responsive to conversations with radiographers during the treatment period. This study seeks to further understand radiographer and patient experiences, determine shared priorities for improvement in clinical interaction and develop communication guidelines and training to help radiographers support patients.Methods: Using the principles of Experience-Based Co-Design, semi-structured interviews were held with N = 4 patients and N = 4 radiographers, followed by feedback events to validate findings. Patients and (...) radiographers exchanged experiences in a joint co-design session, agreed with shared priorities and generated ideas for further support. A survey was conducted for process evaluation. To scale up findings, UK-wide representatives from patient networks and radiographers and managerial staff provided consultative input utilizing an iterative, adaptive procedure.Results: Radiographers expressed a need for support with “difficult conversations,” especially those on Fear of Cancer Recurrence, and their appropriate management. Important pointers for reassuring communication were identified, including: being treated like a person, knowing what to expect, and space to ask questions. The co-design process was rated positively by both staff and patients. Thematic collation of findings and mapping these on literature evidence resulted in the “KEW” communication guidelines for radiographers: Know, Encourage, Warmth. National stakeholder consultations validated and helped fine-tune the training model. The resulting training package, included: trigger videos, a simulated patient scenario and interactive handouts on fears of cancer recurrence and the patient pathway.Conclusions: The co-design process captured good practice to help standardize quality in empathic communication in the radiotherapy service. The resulting KEW: Know, Encourage, Warmth guidelines, and training package are user-centered as well as evidence-based. Supplementing single-site co-design with national consultative feedback allows for the development of interventions that are relevant to the clinical practice, even in detail, and helps to generate appropriate buy-in for roll out on a wider scale after evaluation.Trial Registration:www.ClinicalTrials.gov ID: NCT03468881. (shrink)

The paper aims at analyzing the production of creditworthiness within the context of commercial banking in international banks. Taking the interim financing in the Polish automobile sector as an example, the paper reconstructs the process between legal framing of the financial instrument, marketing, and risk management. Firstly, it shows that changes in the state vehicle registry function as a prerequisite upon which the bank uses the newly introduced vehicle registration document as a security. Secondly, it analyzes the (...) change of perspectives which takes place between the marketing of the product and the analysis of documents . Thirdly, it argues that creditworthiness cannot be deduced from the economic representation of the enterprise but is the very result of negotiations between the actors involved. (shrink)

Recent history reveals a series of rogue traders, jeopardizing their employers’ assets and reputation. There have been instances of unauthorized acting in concert between traders, their supervisors and/or firms’ decision makers and executives, resulting in collusive rogue trading. We explore organizational misbehaviour theory and explain three major collusive rogue trading events at National Australia Bank, JPMorgan with its London Whale and the interest reference rate manipulation/LIBOR scandal through a descriptive model of organizational/structural, individual and group forces. Our model draws (...) conclusions on how banks can set up behavioural risk management and internal control frameworks to mitigate potential collusive rogue trading. (shrink)

The marketization of interest rate is an inevitable requirement for China’s financial reform and joining the WTO to connect with the international financial market. It is also an important link to improve the marketization degree of China’s financial system. The marketization of interest rate in China is gradually advancing according to its preset mode. In the process of interest rate marketization, an unavoidable problem is that while the interest rate marketization gives the commercial banks the autonomy of capital pricing, the (...) fluctuation of interest rate is more and more frequent. However, due to the fluctuation of interest rate, the loan as the main assets of commercial banks will be prepayed by borrowers, and the time deposit as the main liabilities of commercial banks will be withdrawn by depositors in advance; that is, embedded options are implied in asset liability items, which makes it difficult for commercial banks to accurately calculate the actual interest margin of deposits and loans and manage the interest rate risk. Therefore, it is of great significance to identify and price such embedded option value. On the basis of identifying and decomposing the embedded options in deposit and loan of commercial banks, according to the change characteristics of deposit and loan interest rate of Chinese commercial banks, this paper chooses jump-diffusion interest rate model to describe the change of benchmark interest rate of deposit and loan in China and demonstrates the advantages of this model compared with other models. Based on Monte Carlo simulation technology, the embedded options of five-year fixed deposit and ten-year prepayable loan in China are priced. On this basis, it points out that the real interest margin of commercial bank’s deposit and loan should be the nominal interest margin minus the value of deposit and loan’s embedded options. In the process of interest rate risk management, we should pay attention to the existence of embedded options and carry out effective management. (shrink)

We examine the implications of the US government’s too-big-to-fail policy as it has been applied to banks. Using alternative measures of risk, we compare the risk-taking behavior of 11 TBTF banks, identified by the Comptroller of the Currency in 1984, to a number of non-TBTF banks. We provide both theory and new empirical evidence to support our argument that the TBTF policy leads management to significantly increase risk-taking, with no corresponding increase in performance. While prior studies (...) have considered the effects of the TBTF policy on limited, but risk-related aspects of bank behavior, such as the cost of funds, our study provides direct evidence about the risk-taking behavior associated with the TBTF policy. Our study has important implications for the current political debate regarding the too-big-to-fail policy. (shrink)

Banks have an important social responsibility to serve the real economy and to maintain financial stability, and they also need to be responsible to borrowers and others. Against the backdrop of the COVID-19 pandemic affecting the global economy and increasing financial risks, it is particularly important for banks to assume social responsibilities. This study theoretically analyzed the outstanding applicability of stakeholder governance theory. Using a two-stage game method, the optimal pressure intensity of the social responsibility stakeholders was calculated, and the (...) dynamic performance of shareholders was deduced. We found that the establishment of the social responsibility stakeholder governance mechanism will prompt the bank to fulfill its social responsibilities; rational social responsibility stakeholders will not lead to poor bank management due to excessive behavior; and shareholders with social responsibility can self-consciously choose the investment projects with lower negative externalities. The conclusions can be summarized as follows: The participation of stakeholder and the establishment of the social responsibility function of the board of directors can help promote a bank's social responsibility performance. This work studied the social responsibility of banks from the new perspective of stakeholder governance, expands the theoretical boundaries, and puts forward relevant suggestions to enhance the application value of this research. (shrink)

The global financial crisis of 2008 brought the risk involved in the international banking business to everybody’s attention. It made clear that risk, despite the claims of banks, cannot be hedged away. The risk inherent in the banking business has been realised. It was realised to a larger extent and in different dimensions than assumed by risk management, quantitatively and qualitatively, and it had more severe effects than imagined before. This paper takes this event as (...) an opportunity to reconsider the term ‘risk’ itself from an unusual perspective. Aspects from the philosophy of Jacques Derrida, his considerations of the event, the im-possible or the horizon are used to interrogate the term ‘risk’ and to propose a ‘risk to come’. (shrink)

There is a distinct lack of research into the relationship between corporate governance and corporate social responsibility (CSR) in the banking sector. This paper fills the gap in the literature by examining the impact of corporate governance, with particular reference to the role of board of directors, on the quality of CSR disclosure in US listed banks’ annual reports after the US sub-prime mortgage crisis. Using a sample of large US commercial banks for the period 2009–2011 and controlling for audit (...) committee characteristics, board meeting frequency, and banks’ profitability, size and risk, we find evidence that board independence and board size, the two board characteristics usually associated with the protection of shareholder interests, are positively related to CSR disclosure. This indicates that, with regard to CSR disclosure, more independent boards of directors and larger boards are the internal corporate governance mechanisms which promote both shareholders’ and other stakeholders’ interests. Contrary to our expectations, CEO duality also impacts positively on CSR disclosure. From an agency-theoretical viewpoint, this suggests that powerful CEOs may promote transparency about banks’ CSR activities for their private benefits. While this could indicate that powerful CEOs are under particular pressure to appease stakeholders’ concerns that they might abuse their power by providing a high degree of CSR disclosure, it could also be a sign of managerial risk aversion or managers’ private reputational concerns. (shrink)

Fortis, the leading Benelux financial group, had been a success story of successive mergers of bank and insurance companies, with leadership in corporate social responsibility (CSR). One year after the acquisition of the major Dutch financial conglomerate ABN AMRO, the global financial crisis caused the collapse of the Fortis group. The purpose of this article is to use the case study of Fortis’s recent fall as a basis for reflective considerations on the financial crisis, from stakeholder and ethical perspectives. (...) A selected number of key events of the history of the dramatic crisis at Fortis will be analysed from different ethical frameworks. Special consideration will be given to fairness of communication, shareholder activism and conflicts of interests of CEO’s mergers opportunities. A confrontation between the CSR policy and the reality raises the fundamental questions why the powerful CSR guidelines and ethical principles did not help in the assessment of the risks. (shrink)

AbstractEnduring unethical behavior in trading has generated much research interest, and scholars disagree on the reasons for this situation. According to MacIntyre (2015), this has to do with the personal traits of traders, whereas Rocchi and Thunder (2019) argue this is due to permissive work environment that can potentially be changed to favoring ethical trading. We contribute to this debate by exploring how interactions between organizational culture and management control systems (MCSs) may affect the enduring unethical behaviors of traders. (...) We conceptualize this with the concepts of organized hypocrisy (Brunsson 1986, 1989, 1993) and decoupling (Meyer and Rowan 1977). An in-depth case study of fraud (Jerome Kerviel at Societe Generale), informs the empirical inquiry. We develop the concept of organized decoupling to characterize how the MCSs are articulated with the organizational culture favoring unethical behavior, while being used as a ‘safety mechanism’ to manage the legal and reputational risk of the bank. The analysis highlights three key features of the organized decoupling of MCS: physical distance, technical distance and social distance. The study contribution lies in showing that decoupling is not only emergent but might be intended and therefore organized. The findings also raise doubts on the role of MCSs in monitoring trading activities as presented by investment banking institutions and regulators, suggesting more organized hypocrisy, and raising significant concerns regarding the creation of tolerable work environment welcoming ethical behaviors in the investment banking sector. (shrink)

In this important collection of essays, Rochet examines the causes of banking crises around the world in recent decades, focusing on the lender of last resort; prudential regulation and the management of risk; and solvency regulations.

Fallacious anthropomorphic attributions such as 'risky technology' take ethical accountability out of the hands of managers and relegate it to the deterministic or accidental outcomes of complex 'high risk technology'. Equally fallacious mechanistic terms such as 'organisational inertia' are borrowed from physics to apply to human organisations. The responsibility for ethically accountable decision-making is taken out of human hands and either ascribed to the mythological entity "Technology" or to the mythological bureaucratic organisation which functions as if it follows the (...) laws of physics. I argue in contrast that disasters can be prevented by demythologising the belief systems that pervade risk management literature. Risk management must reclaim ethical accountability by replacing notions such as 'risky technology', 'high risk technology', 'risky work' and 'bureaucratic drift' with 'risky assessment', 'risky management', 'risky choice' and 'multiple responsibility'. (shrink)

Risk management of nanotechnology is challenged by the enormous uncertainties about the risks, benefits, properties, and future direction of nanotechnology applications. Because of these uncertainties, traditional risk management principles such as acceptable risk, cost–benefit analysis, and feasibility are unworkable, as is the newest risk management principle, the precautionary principle. Yet, simply waiting for these uncertainties to be resolved before undertaking risk management efforts would not be prudent, in part because of the (...) growing public concerns about nanotechnology driven by risk perception heuristics such as affect and availability. A more reflexive, incremental, and cooperative risk management approach is required, which not only will help manage emerging risks from nanotechnology applications, but will also create a new risk management model for managing future emerging technologies. (shrink)

The relationship of corporate social responsibility to risk management has been treated sporadically in the business society literature. Using real options theory, I develop the notion of corporate social responsibility as a real option its implications for risk management. Real options theory allows for a strategic view of corporate social responsibility. Specifically, real options theory suggests that corporate social responsibility should be negatively related to the firm’s ex ante downside business risk.

In recent years, development practice has seen that microfinance institutions are starting to consider their environmental bottom line in addition to their financial and social objectives. Yet, little is known about the characteristics of institutions involved in environmental management. This paper empirically identifies the characteristics of these MFIs for the first time using a sample of 160 microfinance institutions worldwide. Basing our analysis on various econometric tests, we find that larger MFIs and MFIs registered as banks tend to perform (...) better in environmental policy and environmental risk assessment. Furthermore, more mature MFIs tend to have better environmental performances, in particular in providing green microcredit and environmental non-financial services. On the other hand, financial performance is not significantly related to environmental performance, suggesting that ‘green’ MFIs are not more or less profitable than other microfinance institutions. (shrink)

Risk management is certainly one of the most important professional responsibilities of an engineer. As such, this activity needs to be combined with complex ethical reflections, and this requirement should therefore be explicitly integrated in engineering education. In this article, we analyse how this nexus between ethics and risk management is expressed in the engineering education research literature. It was done by reviewing 135 articles published between 1980 and March 1, 2016. These articles have been selected (...) from 21 major journals that specialize in engineering education, engineering ethics and ethics education. Our review suggests that risk management is mostly used as an anecdote or an example when addressing ethics issues in engineering education. Further, it is perceived as an ethical duty or requirement, achieved through rational and technical methods. However, a small number of publications do offer some critical analyses of ethics education in engineering and their implications for ethical risk and safety management. Therefore, we argue in this article that the link between risk management and ethics should be further developed in engineering education in order to promote the progressive change toward more socially and environmentally responsible engineering practices. Several research trends and issues are also identified and discussed in order to support the engineering education community in this project. (shrink)

Risk management has become a vital topic both in academia and practice during the past several decades. Most business intelligence tools have been used to enhance risk management, and the risk management tools have benefited from business intelligence approaches. This introductory article provides a review of the state-of-the-art research in business intelligence in risk management, and of the work that has been actepted for publication in this issue.

Although enterprise risk management (ERM) has many benefits for corporations, there has been virtually no discussion of the extent to which its practice may be said to constitute corporate social responsibility. This article presents a prima facie case for the convergence of the two and examines this case through a consideration of four possible objections or challenges. The conclusion of this article is a tempered optimism that ERM has the significant, but as yet untapped, potential to constitute socially (...) responsible activity, which, if realized, would enable Adam Smith's invisible hand of the marketplace to have an expanded sweep. (shrink)

Good epistemic practices are essential to the well-functioning of organizations. Epistemic practices are adopted norms, policies, procedures, and general methodologies that further our epistemic aims or realize our epistemic values. This chapter argues for the importance of organizational good epistemic practices through an analysis of the failures of risk management implicated in JPMorgan’s notorious ‘London Whale’ trading losses, which roiled the financial markets in 2012. A number of these failures of risk management exemplified ways in which (...) we, as fallible reasoners, may be prone to error individually and collectively. Good epistemic practices inter alia anticipate and endeavor to correct for erroneous patterns of reasoning. They help guard against future epistemic failings, and they support good reasoning within and on the part of organizations. In so doing, they constitute some of the key structural elements of organizational epistemic virtues. (shrink)

William F. Doverspike, PhD, is a licensed psychologist who holds a Diplomate in Clinical Psychology (ABPP) and he is also board certified in Neuropsychology (ABPN). He is an Associate Faculty member of the Georgia School of Professional Psychology, where he teaches graduate courses in professional ethics. As an independent practitioner, he maintains privileges at several local hospitals. He is a member of the Ethics Committee of the Georgia Psychological Association. Dr. Doverspike is Editor of the Georgia Psychologist magazine and has (...) authored over 50 articles and chapters. He conducts seminars on ethics, risk management, and diagnostic consultation. (shrink)