The Linkage Between Corporate Social Responsibility and Risk Management to the Banking Industry - Dissertation Example

Over the past three decades, Corporate Social Responsibility (CSR) has emerged as a field of study and a framework for the role of business corporations and financial institutions in society (Dusuki, 2007, Pp. 389 – 390). New problems that confront humanity and organized societies, including the state of the world’s environment and the impact of humanity on ecology, have meant that public expectations now demand that businesses and organizations address better the impact of their operations on the environment and the society at large.

In addition to the new problems confronting humanity, a series of spectacular ethical and governance compliance failures, including Enron, WorldCom, and other disasters have presented increased public attention to issues that focus on governance and compliance risks. Thus, a climate now exists for heightened scrutiny of corporate behavior and increasing demand for CSR programs by the public, consumers, and investors (Castello, 2009, Pp. 373 – 374). Investments in CSR programs enhance public confidence and act as insurance against the impact of any negative event that may confront a business (Godfrey, 2008, Pp.

425 – 426). Thus, a linkage exists between CSR and corporate risk management strategy that attempts to maintain corporate prestige and mitigate the impact of any negative event confronting a firm. Increasingly, CSR is about risk management and risk management is about CSR, with corporations having long understood the duty of care towards their employees. However, now stakeholder expectations demand a broader umbrella of responsibility that includes the environment, human rights, investments that benefit communities and the society and care for the less fortunate, etc.

CSR initiatives in corporations are now of significance because a failure to pay due attention to such initiatives is likely to result in an enhanced risk of reputational damage and a lack of social acceptance.