Integrated Risk Management to Measure the Performance of the Agri-Food Sector.

Friday, 3 July 2015: 10:15 AM-11:45 AM
TW1.3.03 (Tower One)
Maria Jesus Munoz, University Jaume I, Castellon, Spain
Juana Maria Rivera, University Jaume I, Castellon, Spain
Raul Leon, Unversidad de Zaragoza, Teruel, Spain
The advance of globalisation has brought many occasions to organizations, but equally, a number of reasons for uncertainty and risk. As a result, organizations must strive to adapt their decision-making and management models to a new scenario in which an unpredictable future calls for greater cooperation between companies and their stakeholders; groups that include not only traditional customers and investors, but employees, governments, suppliers, NGOs, and the media, among others.

The identification and measurement of uncertainty, traditionally linked to the concept of risk, has been researched in depth throughout history. Mainly, risks related to the economic and financial aspects of companies. To a large extent, the literature defines risk as the uncertainty in specific outcomes or events, with special emphasis on the future (Bloom & Milkovich, 1998; Miller and Bromiley, 1990). In the case of businesses, risk has historically been defined as a measure of fluctuations in the financial results of companies over time (Donaldson, 1999).

Proper risk management has been a major challenge for both companies and investors, since uncertainty about the results or future events constitutes a major impediment to proper projection and planning (Bettis and Thomas, 1990 and Sharpe, 1990). Literature shows that risks are managed differently by investors than business managers. Thus, in non-systemic risks, i.e., those affecting a specific group of organizations and not all of them, investors reply by diversifying their portfolios, so that risks associated with the concerned companies are diluted in the overall depth of the assets. However, from the perspective of managers of organizations, risks should be managed actively, since the survival of their companies may be limited by their ability to reduce risks.

In this scenario, management and evaluation of social and environmental risks, understood in its broadest sense is of paramount importance for their survival, and for the proper development of the societies where they operate.

So, it is of the essence to advance in the development of measurements for organizational outcomes that incorporate the concept of comprehensive risk as an essential element for decision-making and investment management in organizations.

The performance in corporate sustainability is a complex concept that brings about a wide range of activities and services related to a number of social, environmental and economic aspects mutually related. Presently, although there are various schemes that structure business results in sustainability (GRI, AA1000, XBRL-RSC, and so forth), providing measurements shaped as indicators, they have not reached a well-accepted standard for measuring the sustainability performance; and there are still doubts about whether the existing sets of indicators provide enough transparency, since they report results but not the risks involved to achieve them.

Literature also identifies evidence of the existence of a virtuous circle between the risk taken by companies and their financial profitability (Waddock and Graves, 1997). Companies with controlled risk levels can aspire to a more accurate, future planning, that allows for a more efficient use of available resources; thus, improving business results with less uncertainty and better managing the opportunities arising from corporate social responsibility (CSR). Furthermore, the adoption of policies and practices of CSR contributes positively to the reduction of risks, including those of a environmental, social and governance (ESG) nature; therefore, reducing uncertainty about the future of the company.

The aim of this work is to measure the performance of organizations in terms of sustainability, incorporating variables of risk assessment in order to adjust the measured results. With the above-mentioned assessment in terms of profitability and risk of organizational sustainability, the concept of social performance —widely used in the literature on CSR— would be close to the term ‘performance’ as it is traditionally interpreted by the financial literature.

In order to do this, following a review of the current state of research on the origin and the management of risks, a classification of the ESG risks with the greatest impact in the agri-food sector has been identified and developed to further define the models for their measurement and assessment.

The choice of the agri-food industry is based on several factors. Aspects such as the management with CSR criteria of the supply chain and of suppliers based in developing countries, the consequence of a healthy agenda in the food industry, and the impact of all these challenges in agri-business operations, is attracting a whole set of global research (Moore, 2001; Moore and Robson, 2002; Maloni and Brown, 2006).

The objectives of this study allow to advance in the development of CSR in the agri-food sector, and in the shift towards a sustainable development model; encouraging the management of organizations and the right appraisal of investments while addressing not only the results, but also the tolerable degree of risk to which organizations are exposed in order to achieve them.


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