Risk and Opportunity Management for Corporate Social Responsibility

Recently, we have been discussing the theory and importance of Risk Management in project planning and management. In order to manage risks in a project, there are several tools used to plan for all possible negative impacts on a project. Project managers fill out several charts, analyzing the likelihood, severity, impacts, warning signs for each possible risk. They construct a specific budget for necessary preventative measures and possible contingency plans required to mitigate these risks.

In Risk Management, some big questions have to be answered: whats the likelihood of this risk happening?  And how much (money, time, resources, etc) is it going to cost me?

 

Typical Tool Used in Risk Management

One interesting topic discussed was the recent emergence of opportunity management as a core strategy to help design a project. The conversation got me to thinking about the utility of managing your opportunities. Incorporating opportunity management in projects, specifically, in the analysis of Corporate Responsibility projects, could have a large positive impact in helping to change popular opinion surrounding the topic.

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Certification Schemes in Properly Managing our Environment

One major question I seem to struggle with all the time is how to know whether or not we are making smart choices as consumers.

How do we know whether or not the fish we are eating comes from an over fished lake or river? How do we know if the Ikea table we bought is made from wood sourced from a logging company contributing to deforestation?

To answer this question, lots of organizations have come up with certification schemes to help show customers, with a “seal of approval” label, that products are fair trade, sources responsibly, etc.  Unfortunately, not all of these certifications may be as credible as one would hope.

Here are a few things to look for:

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Global Rate of Consumption Reaches 1.5 Planets; America Reaches 4.

The rate at which Americans use natural resources is strikingly unsustainable; yet, they are not alone. Fortunately, the WWF has come up with some ways to fix it.

The planet is suffering from man’s demand for food, water, ipads, and airplanes. Not only are we over consuming our natural resources at an unsustainable rate, but the amount of biodiversity in many parts of the world is dramatically declining. In order to combat this problem, the WWF, one of the world’s largest conservation organizations, has laid out a global plan.

According to the recent WWF Living Planet Report, the rate of resources we consume globally in one year requires 1.5 years time for the Earth to regenerate the renewable resources used, and absorb the CO2 waste produced. Think about that stress on our Earth’s resources, year after year, without time to recuperate and replenish.

Although this statistic may seem high, consumption is expected to increase during the next decades. One main factor will be the increase in population and economic growth in countries like Brazil, India, Indonesia, China and South Africa – often called the “BRIICS” for their recent economic success. As developing countries grow, they are going to demand lifestyles and consumption rates similar to those seen in fellow “rich” countries. If they attempt to attain lifestyles similar to Americans, we’ll need 4 planets worth of resources to meet these demands.

Source: WWF Living Planet Report 2012

So, what are we supposed to do? In the Living Planet Report, the WWF has defined 5 areas in which our current global system needs to focus their efforts:

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Economic Growth, American Politics and NeoLiberalism

Over the Holidays, I have found myself having several conversations regarding Microfinance: its benefits, its costs, the theory behind its popularity, the practical results on the ground, and why so many people – especially in the US – believe that helping the small entrepreneur will innately help the rest of the population.

The latter specifically became a rather heated discussion in my household as it feeds directly into the Republican vs. Democrat debate.

My mother, a devout Republican and small business owner in the US, is a firm believer that by hurting small business, you will inevitably hurt the working class. Businesses are what provide jobs and security to the working class. If businesses have to pay higher taxes or are unable to acquire capital, they will be unable to support their workforce. Therefore, if the government would be less restrictive on business, America could “get back to work” and pull itself out of the recession. This idea was concisely expressed by Terry Paulson, Republican political columnist, during the recent election:

Romney/Ryan will incentivize investors and entrepreneurs to get America working again… Instead of raising taxes, Romney/Ryan will cut taxes and spending while increasing federal revenue when more companies are making a profit, more people are working, and wages are growing. It’s time for free enterprise to do what Washington can never do–create jobs, jobs, jobs!

During our discussion, I could not stop thinking about how similar this “mantra” is to that of NeoLiberalists.

NeoLiberalism stems from “Classic Liberalism” which was founded by the “grandfather of Economics”, Adam Smith, in Wealth of Nations. Sound familiar? Remember the “Invisible Hand”?

The “Neo” in Neo-Liberalism comes from a rebirth and development of these classic ideas during the Cold War by several economists including, an notable economist named Milton Freidman.

Defined by its basic principles, NeoLiberalism theory states:

  • Sustained economic growth is the way to human progress
  • Free markets without government “interference” would be the most efficient and socially optimal allocation of resources
  • Economic globalization would be beneficial to everyone
  • Privatization removes inefficiencies of public sector
  • Governments should mainly function to provide the infrastructure to advance the rule of law with respect to property rights and contracts.

Following this logic, at the international level NeoLiberalism theory argues:

  • Freedom of trade in goods and services
  • Freer circulation of capital
  • Freer ability to invest

Sounds good, right?

For a lot of people, NeoLiberalism makes sense. It is what I learned during my studies at UCLA: economic models prove its “efficiency” and the global capitalism in which we live today was built from its ideas. Famous political leaders such as Ronald Reagan and Margaret Thatcher subscribed to it and organizations such as the WorldBank, World Trade Organization (WTO), and the International Monetary Fund (IMF) were built around the theory:

If we let the markets run freely, business will grow and economic benefit will “trickle down” to the bottom of society. Free market competition is the best way to promote growth and alleviate poverty:

But, has this really worked? Has NeoLiberal theory helped the poorest groups get “lifted out” of poverty?

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