Expert Corner: Integrated Corporate Social Responsibility (CSR) & Crisis Risk Analysis (CRA)
Integrated Corporate Social Responsibility (CSR) & Crisis Risk Analysis (CRA)
//by Rachel Zedeck
Introduction
Corporate social responsibility (CSR) promotes the vision of a commercial organization’s business accountability to a wide range of stakeholders, in addition to shareholders and investors. The original drivers behind CSR initiatives focused on environmental protection and the well-being of employees. Concern for domestic communities has slowly migrated towards concern of civil society within a global agenda of human rights and economic stabilization. The realization of a connection between the daily operations of a company and the well-being of society now drives a more comprehensive approach to corporate citizenship. While these models are slowly taking root within the domestic business models of Europe and North America, the same principles are essential in proactive and socially responsible business development in international marketplaces. These principles are even more critical within the stratagem of conflict and post-conflict regions desperately seeking economic stability as a core component in building or stabilizing new nation states. While the largest global brands set the bar within domestic business models, the use of subsidiary enterprises divest these accomplishments when reflecting upon the business models pursued in conflict regions. A negative perception has historically fallen on the oil and gas, diamond and textile industries but the evaluation process of global brands can no longer be isolated. 
Consequently, a global business agenda firmly rooted with cooperative CSR ideologies necessitates a transition from theoretical to support a diversified design and implementation model of initiatives, overcoming a diversity of obstacles in conflict regions, including operational, historical, political, and cultural. A key challenge facing any global business initiative is the need for more reliable research, analysis and realistic indicators of progress faced with the unique characteristics of conflict and post-conflict environments. The objectives of commercial development can be accomplished by integrating Crisis Risk Analysis (CRA) into existing operational and CSR models.
CRA has been historically utilized by military and security professionals to evaluate the risk factors of high risk environments by utilizing standardized evaluation models. These models document a network of mitigating factoring, including historical context, economics, political structures, threats from domestic criminal and terrorist groups and the human security of local populations. This is historically highlighted by the systematic violence endured by women and children in conflict regions. This analysis concentrates on the lack of transparency in these regions revealed in both commercial business ventures and government institutions reflecting the need for sustainable, foreign direct investment and capacity building development initiatives within local communities.
The subsequent integration of transparency and direct community dialogue can ensure the successful foundation of new business initiatives in a multitude of conflict environments. The ensuing programs reflecting integrated CRA analysis with CSR programs embody numerous benefits.
First, these efforts can immediately reflect constructive streamlining of a commercial organization’s operational models, improving efficiency and financial returns. At the outset, CRA models provide a commercial organization with a preliminary framework to evaluate the security of proprietary operational investments centered in these regions.
Secondary returns offer more strategic benefits. Firms who choose to invest responsibly into the long term strategy of a conflict region’s “human” development will see a positive return by building a sustainable network of skilled and unskilled labor with lower attrition rates and increased cooperation and internalized security supported by from local communities and their political leadership.
CRA provides an organization with the knowledge to initiate, restructure or modify existing CSR initiatives reflecting the legitimate needs of local communities affected by conflict. Institutionalizing these “intelligent” business models can maintain both sustainable economic development and humanitarian initiatives while propelling sustainable, economic returns. The following summaries provide profiles for risk factors, risk management and CRA. The core of any operational model is supported by supply chain management (SCM). To demonstrate practical implications to an organization’s operations, the impacts of CRA modeling on SCM have also been outlined.
Direct and Indirect Risk Factors
- Unstable political regime and infrastructure
- Poorly regulated (local) administrations and lack of transparency
- Economic instability
- Terrorist organizations
- Organized crime
- Corruption
- Widespread poverty
- Substandard transport infrastructure
- Unskilled labor force
- Cultural diversity
Risk Management
- Risk Management is the process of protecting an organization from financial harm by identifying, analyzing, financing, and controlling risk at the lowest possible cost. Effective Risk Management is a progression of actions that are taken with the purpose of minimizing losses or injuries within the organization.
Crisis Risk Analysis (CRA)
- To determine the specific events that can adversely affect an organization, the damage that such events can cause, the timescale needed to restore normal operations and the controls that can be implemented to reduce the probability of impact. Operational models are founded in Supply Chain Management (SCM).
- The same principles are applied when analyzing a conflict region including the specific history and events negatively affecting the stabilization of both “state” and “human” security models.
Risk Management Factors
- A structured approach to risk evaluation involves four steps:
- Asset and threat identification
- Quantification of potential losses
- Assessment of vulnerabilities
- Evaluation of solutions or mitigating factors
- This model is the foundation of data used to evaluate the risk of a physical, operating environment such as a warehouse facility where commodities are received to support direct or indirect Supply Chain Management (SCM). A specific reference model for SCM has been defined below demonstrating some of the practical security and cost saving implications CRA offers an organization’s operations.
- This model also establishes the risks of launching a sustainable, capacity building and transparent CSR initiative within a developing community’s existing network.
- Cooperative development with established government bodies
- Identifying new stakeholders within local community leadership
- Establishing a network within the international aid community
CRA and Supply Chain Management (SCM)
Any organization’s supply chain is composed of the commercial links between suppliers and customers within supply model, as well as their interdependence and can represent considerable commercial risks. Practical considerations in planning supply chain risks in high risk environments from a theoretical as well as a practical perspective include a number of different issues.
- Domestic customs clearance requirements and shipping protocols
- Internalized standard operating procedures (SOP)
- Physical security of shipments (includes environmental risks)
- Physical security of personnel (threats from local disease, robbery, kidnapping)
- Dedicated (local) government contacts (POC)
- Dedicated (local) community contacts (POC)
- Local distribution models (local SCM agents)
- Service Level Agreements (SLA)
- Operational insurance policies
- Cost Benefit Analysis (CBA)
- Diversity and Human rights
- Philanthropy and community
Conclusion
The impact of major global crises is increasingly felt by the international community at the transnational level. Regional and international cooperation in the area of crisis management and peacekeeping gains more importance but do not undertake direct, state building initiatives. These initiatives must be complemented by foreign direct investment (FDI) from socially responsible corporations. A holistic approach to FDI can affect realistic change while ensuring the security of physical assets, personnel and financial investment of these commercial ventures.
The public voice represented by this method of responsible investment into conflict regions would be supported by the global community at large. I look forward to seeing which companies commit to the investment to design, train and retain communities of people eager for the opportunity to build a stable country while maintaining successful business ventures.
Supplemental Resources
The following is a collection of resources which may be useful in the research and planning of a CSR initiative into a conflict or post conflict region:
Millennium Poll on Corporate Social Responsibility (1999):
http://www.iblf.org/docs/MillenniumPoll.pdf
World Bank Millennium Development Goals:
http://ddp-ext.worldbank.org/ext/GMIS/home.do?siteId=2
UNCTAD-Least Developed Country Report:
http://www.unctad.org/en/docs/ldc2007_en.pdf
Doing Business 2007: How to Reform:
http://www.doingbusiness.org/documents/DoingBusiness2007_FullReport.pdf
Mobilizing Aid for Trade: Focus Latin America and the Caribbean:
http://topics.developmentgateway.org/trade/highlights/viewHighlight.do~activeHighlightId=114097?intcmp=925
Working together on Gender Equality in Development and Peace:
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/07/1299&format=HTML&aged=0&language=EN&guiLanguage=en
Addressing the Meta-Level - New Approaches to Private Sector Development:
http://www2.gtz.de/wbf/doc/SV_PWF_Meta-Level_Tools_0407.pdf
Good governance, aid modalities and poverty reduction :
http://www.odi.org.uk/pppg/politics_and_governance/what_we_do/Politics_aid/Governance_Aid_Poverty.html
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