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Business Risk Management
Handbook
Dedication from Linda Spedding
To All of My Family, especially Ajan and his Father


The Greatest Service You Can Give to the World
Is to Take Responsibility for Yourself,
Your Relationships and the Environment

Dr S. Purna, The Truth Will Set You Free


Dedication from Adam Rose
This book is dedicated to my family who have humoured me all this time,
for their patience and support, and to all those people out there who are
trying to reduce the impact us humans are having upon our home planet.
Business Risk Management
Handbook
A sustainable approach




Linda Spedding
Adam Rose




• • • LONDON • NEW YORK • OXFORD
AMSTERDAM BOSTON HEIDELBERG
• • SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO
PARIS SAN DIEGO
CIMA Publishing is an imprint of Elsevier
CIMA Publishing is an imprint of Elsevier
Linacre House, Jordan Hill, Oxford OX2 8DP
30 Corporate Drive, Suite 400, Burlington, MA 01803, USA

First edition 2008

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No responsibility is assumed by the publisher for any injury and/or damage to
persons or property as a matter of products liability, negligence or otherwise, or from
any use or operation of any methods, products, instructions or ideas contained in the
material herein

British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library

Library of Congress Cataloguing in Publication Data
A catalogue record for this book is available from the Library of Congress

ISBN: 978-0-7506-8174-2


For information on all CIMA Publishing books
visit our website at http://books.elsevier.com


Typeset by Charon Tec Ltd (A Macmillan Company), Chennai, India
www.charontec.com

Printed and bound in Great Britain

08 09 10 11 10 9 8 7 6 5 4 3 2 1
Contents


Foreword xiii
About SERM and EFR xv
About the authors xvii
Handbook overview xxi
Acknowledgements xxxv
Abbreviations and acronyms xxxvii

Chapter 1 Introduction 1
Business risk overview 2
Definitions of risk 10

Part A Overview of Risk Management 15
Chapter 2 A Sustainable Enterprise Risk Management (SERM) system 17
Introduction to a SERM system 18
A Sustainable ERM strategy 22
The organisational benefits of a SERM system 25
The challenges facing the development of a SERM system 26

Chapter 3 Drivers and trends in sustainability risk management 29
Opening remarks 30
How to use the tools? 32

Chapter 4 Background to key aspects of legal risk management 65
Legal risk management 66
Legal risks 67
Risk identification 69
Risk evaluation 70
Risk management and risk recording 71
Implementing risk management systems 72
Critical factors for successful risk management 88
Governance and regulatory compliance: IT and risk
management 90

Chapter 5 The relevance of due diligence 93
Company goals 94
Drivers for sustainable risk management 95
Risks and rewards of risk management: integration value
post-merger 96
Successful acquisitions and competitive advantage 98
Cultural integration 101
Contents
vi



Chapter 6 Risk and corporate organisational areas: an overview 103
The choice of vehicle and structure and liability in business 104
Risk management 106
Evolving board responsibilities 107
The English legal framework 107
Corporate manslaughter: a case study in risk 108
The business vehicle 109
The limited liability company 110
The Limited Liability Partnerships Act 112
Fiscal transparency 114
Key features of a partnership 115
The sole trader (the one man band) 117
Charities: issues of transparency 118
Accountability and corporate giving 121
Chapter summary 123

Part B Overview of the Economic Aspects of Business Risks 125
Chapter 7 Economic crime, bribery and corruption 127
The international framework 132
An introduction to the business risks 132
Surveys and case studies 134
International case study 137
The current situation: tackling international fraud
and money laundering 142
Some solutions relevant to risk management 143
Corporate identity theft: the approach in the UK 147
Economic crime, transparency, openness and ethics and
small business 150
Governance and CSR: an ethical business opportunity for
SMEs 154
The opportunity for ethical business strategies 155
Company codes 157
Chapter summary 158

Chapter 8 Business interruption and risk management 161
Business interruption and recovery 162
Barriers to developing contingency plans 165
Insolvency and meaning 169
Business continuity and operational risk management 171
The evolution of risk management in practice 172
Crisis management “ a view from the US 176
Managing an environmental, health and safety crisis 176
Preventing an environmental, health and safety crisis 176
How crisis leads to liability 182
The public relations trap 183
The crisis management plan 183
Contents vii



Staying in business “ insurance issues by David Kaye 187
Timeout of marketplaces while workplaces are reinstated 195
Educational programmes 197
Chapter summary 198

Chapter 9 Shareholder value and reputational risk 199
Introduction 200
Brand protection 202
Corporate governance 204
Stakeholders 206
Reputational risk 208
A SERM stakeholder reputation audit 211
Stakeholder risk analysis 215
Stakeholder review 216
Chapter summary 226

Chapter 10 Corporate power, business and marketing risks 229
Unrestrained use of corporate power risks 230
Adverse business practices risk 233
Adverse marketing practices risk 239

Chapter 11 Information technology (IT) and e-commerce: issues of
risk management and corporate governance 247
Use of new technology risk 248
Risk management 250
New technology risk case studies 251
Managing liability issues 254
Consumer interests 255
Evidential issues 256
Design of a risk management framework 256
Business intelligence 257
Intellectual assets 258
Ongoing risks 260
Technology services in internet commerce 261
Nature of technology risks in internet commerce 262
Legal risk issues in internet commerce 263
Managing legal risk issues in internet commerce 263
Compliance relating to business continuity 264
Relationship with technology providers 265

Part C Overview of the Social Aspects of Business Risks 269
Chapter 12 Social and business ethic risk overview 271
The social aspects of business risk 272
The business context 274
Social and ethical risks and trends 274
Risk management best practice 279
Contents
viii



Social and business ethical risks 280
Analysis of social, cultural and ethical risks 282
Case studies 284
Chapter summary 287
Chapter 13 Social and cultural risk management 289
Background and key concepts 290
What is strategy? 291
The strategic process 292
Aligning strategy 294
Why is strategy important for your organisation? 294
How to create and implement strategy in organisations 295
Strategic alliances 300
Culture clash in mergers and acquisitions (M&A):
risk mitigation 301
Cultural due diligence 301
Culture, strategy outsourcing and off-shoring: the Indian
case study 305
Chapter summary 311
Chapter 14 Human resources risk (human rights inside the workplace) 313
SERM risk overview 314
Risk management framework 317
Business benefits of diversity 322
Human rights standards relating to the workplace 323
What are the issues? 325
Chapter summary 345
Chapter 15 Human rights outside the workplace 347
SERM approach 348
The business opportunities 351
Human rights standards 352
Risk management and organisational best practice 355
Best practice in the management of risks 359
Some contemporary risk issues 359
Chapter 16 Health and safety in the workplace 367
Introduction 368
Background 369
The business context 370
Health and safety risks and trends 371
Financial risk 372
Legal risks 373
Stakeholder and reputational risks 375
Risk management best practice 376

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