Indian companies are going global. They are addressing not just customers of developed countries but under explored markets in Africa and Latin America. mining rights in Australia, factories in South Africa and telecom networks in Kenya.
Globalisation and this expansion in scale for Indian companies offers unique opportunities, though at the same time it brings tremendous risks. Scale is many times difficult to manage when companies use strict command and control structures that cant really adapt to changes in local environments. Technology and the fast moving flow of information are also great disruptors that have brought many a global corporation to its knees.
Customers, Suppliers and Governments have been joined by NGOs, Communities, Employees and Media over information networks to create Social Risk.
( http://www.hks.harvard.edu/m-rcbg/CSRI/publications/workingpaper_10_kytle_ruggie.pdf )
Social risk is characterised by four components in combination: an issue, a stakeholder or group of stakeholders, a negative perception about the company, and the means to impact perception of the company adversely.
Global Indian companies now need to factor in the new reality where Reputation, Responsibility and Risk are increasingly interconnected.
CSR provides the framework and principles for stakeholder engagement, supplies a wealth of intelligence on emerging and current social issues/groups to support the corporate risk agenda, and ultimately serves as a countermeasure for social risk. The linkage of CSR to core business processes can improve a company’s overall approach to risk management by improving strategic intelligence and knowledge of social issues/groups. This allows a company to not only design better risk management for current issues but also help anticipate those coming down the pike.
In order to deal with social risk a systematic approach is required one that clearly defines roles and responsibilities, from headquarters to local levels. A timely and integrated response in the time of a flare up makes all the difference.
A proactive approach is, of course, the best option where the company needs to look beyond to anticipate risks from new sources. Appropriate protocols and communication needs to be developed to manage these. Corporate culture and leadership at all levels plays an important role in making the organization strong enough to deal with challenges and take all stakeholders on board.
The best strategy of course is that corporates engage in responsible business practices since their growth and sustainability is interlinked with social and environmental well being. Corporate India has seen in the last decade that the path towards growth is not linear. Constant expansion also means a constant hunt for resources that go into manufacturing and invariably a conflict between man and nature. There is a need to balance opportunity and responsibility. While good governance and far reaching policies are part of the answer, much more needs to be done to manage Risk, Responsibility and Reputation.
Corporate India has a role to play in the global stage and in their contribution to society. In a connected globalised world, intent and action counts. Responsible business rests at the heart of a great corporate reputation.
Article coauthored by Utkarsh Majmudar and originally published in Economic Times.