The globalisation of business has forced a transformational shift in our economic, environmental and geopolitical make-up. While the shrinking world presents us with unparalleled opportunity, it also comes with enhanced risk.
This topic was a key issue raised at the World Economic Forum (WEF) in Davos last month. It was here that the Global Risks 2014 report was launched – a survey of more than 700 leaders and decision-makers from the WEF’s global community on 31 selected global risks.
This report highlighted that global risks are systemic, and that to manage them effectively, better efforts to understand, measure and foresee interdependencies between these risks are urgently required. The report was a call to action to improve coordination and collaboration between all stakeholders, going beyond their traditional roles and responsibilities, to mitigate global risks.
An important way of ensuring greater collaboration across global businesses is to build trust by demonstrating commitment to integrity at all levels of all organisations. The British author CS Lewis once said that “integrity is doing the right thing, even when no one is watching”.
Trust and reputation are inextricably linked, and the age-old saying that it takes years to build a reputation and only minutes to destroy it, is evermore applicable in today’s business world. Trust and integrity are fundamental aspects of business discussions, negotiating a deal, buying or selling a product and developing partnerships.
A company that wants to demonstrate its commitment to integrity must first offer evidence that its actions are trustworthy. By acting in an ethical manner, all entities can benefit from openness, which in turn allows for risks to be identified earlier and mitigated more effectively.
The world is in a “crisis of trust”, with opinion polls implying that big business is now trusted less than ever before. High-profile corporate scandals have demonstrated that any organisation that deliberately sets out to deceive will pay a high price for doing so.
New technologies also mean that we are living in an age of “hyper-transparency”, with more and more information available online. We may assume that greater transparency leads to greater trust, but a world in which we are flooded with too much information can also make it more difficult to discern facts from rumours and the true picture from deception.
How do we know who is acting with integrity any more? From a corporate viewpoint, what is certainly true is that high expectations and scrutiny are here to stay – there is nowhere left to hide.
It is fair to say that different regions and markets of the world have varying perceptions of integrity, and what may be considered immoral when it comes to business practices. This leaves the potential for risk wide open. It is therefore vital that we do not simply copy and paste solutions from one part of the world and attempt to apply it in another. Instead, we must identify and apply learning from global best practice, while ensuring that it is regionally relevant and culturally sensitive.
Regulation is intrinsic to raising standards of corporate governance. Last year, the Federal National Council passed a draft companies law to encourage the adoption of international best practice across the UAE. These guidelines will change the way directors and company auditors can be held to account in regards to corporate governance, by providing clear responsibilities to ensure greater transparency and accountability. As a result, the legislation will help to encourage greater regional economic activity, which in turn could facilitate the boost needed to generate the tens of millions of new jobs required every year for the youth of the Arab world.
That said, regulation alone is not sufficient. To ensure that companies and organisations actively embrace best practice principles based on personal integrity, they must first accept that there is true potential for value creation in adopting these ideals. In essence, companies need to first appreciate that good corporate governance based on values of integrity leads to greater success and will ultimately be reflected in their bottom line.
There is a growing understanding of how integrity-led best practice can help a business to attract external capital, customers and business partners. Over the past few years, companies across the region have not only come to accept, but embrace, the need to adopt integrity-related policies and best corporate governance practices. This in turn will undoubtedly help these companies and their stakeholders better prepare for and mitigate global risks.
Badr Jafar is the managing director of the Crescent Group and founder of the Pearl Initiative