The Caux Round Table (CRT) today described the BP crisis in the Gulf of Mexico as fundamentally a governance failure and called on corporations to take the lead in preventing such failures by embracing a more responsible and moral form of capitalism.

CRT Chair Dr Noel Purcell stated that the failure of BP to prevent and, subsequently, to be able to control the massive oil leak from their well in the bed of the Gulf of Mexico, demonstrates the need for more enlightened and improved corporate management of risks.

The environmental and social harms precipitated by the Gulf of Mexico crisis parallels the economic and social harms triggered by poor risk management on the part of banking firms in the lead up to the Global Financial Crisis of 2008. In both cases, risk management was compromised as senior corporate officers and boards of directors failed to closely monitor and control the widening of risk parameters as the limits of technology, on the one hand, and of financial leverage on the other, were pushed to extremes.

Recognizing that management of risks and stakeholder impacts determines the quality of a company's responsibility and resilience, the Caux Round Table has pioneered development of a new approach to management of such obligations.

The approach recognizes that risk is inherent, not just to business, but to the human condition, which always seeks to apply intelligence and creativity to use of our resources. It recognizes that the need of business and humanity is to manage risk and not to foolishly seek its elimination. An equilibrium embracing a range of acceptable risks is the goal of the approach. This is especially needed in free market environments where the propensity of modern business is to accelerate risk taking through invention of new technologies and new methods of financial intermediation.

Finding the right level of risk invokes application of sound judgment and so needs to be placed with persons of wisdom and good character, who possess a sense for history and understand the frailties of human nature and the role of the common good.

"Capitalism is the best means to positively channel humanity's access to needed resources, both natural and financial, especially in the form of successful enterprise. But equally, irresponsible capitalism ultimately causes material harm economically, socially and environmentally" said Dr. Noel Purcell, CRT Chair.

As experienced by the banks and now by BP, poorly handled risk management that results in material social harm, directly leads to the re-issuance of society's license to operate on new and more restrictive terms. Most often, these new restrictions are placed in the law and in regulatory supervision of key business decisions. Just recently, the United States Congress adopted new laws limiting the entrepreneurial freedoms of financial firms. And the Obama Administration has required BP to contribute US$20 billion to a fund for payment of damages caused by the oil gushing into the waters of the Gulf of Mexico.

Therefore, to maximize the scope of their licenses from society, responsible private firms need enhanced techniques to enable their boards of directors to exercise fiduciary attention over a wide range of risk possibilities. Society trusts more those firms that act ethically and responsibility, permitting them greater flexibility to seek profitable business opportunities.

"It is the responsibility of boards of directors to watch the pots that might boil over and scald all about them. Management of risk is too important to be left to staff professionals. Poorly managed risk threatens the fundamental financial value of the enterprise and so preserving enterprise value through proper stewardship of risk is a fundamental board responsibility", Dr. Purcell said.

The CRT risk assessment process, titled Arcturus, also recognizes the enormity of such responsibility in large modern multi-national corporations engaged in complex, far-flung operations. It enables boards of directors, in timely fashion, to gain accurate assessments of a company’s risk profile.

The Arcturus process is simple but subtle. It permits boards and senior managers to monitor future developments of concern to stakeholders. It builds on the proven lessons of quality management, which after all, was a most successful enhancement of risk management issues.

The Arcturus process engages the experience and the judgments of directors, senior managers and line professionals. It surfaces concerns that a company’s quality of performance is at risk and helps prevent it being compromised by short-sighted views of risk.

For more information on Arcturus, contact Stephen B. Young, CRT Global Executive Director at:
Steve@cauxroundtable.net
+1 651 223 2852
and by mail at
The Caux Round Table
Six West Fifth St, Suite 300M
Saint Paul, MN 55102 USA

Caux Round Table, The

Caux Round Table, The

Vision: Our VISION is for a world with - Rising Living Standards, Social Justice and Human Dignity for All Our vision is all about being obsessed with better possibilities for all. This vision is not small; to facilitate change for the better in humanity's ability to raise living standards, provide for social justice and realize the fullness of individual human dignity in all our days is a challenge of massive proportions but it is a challenge we readily accept. To achieve it, we will have to inspire and lead with inspiration and courage.

Mission: Our MISSION is twofold:

* To promote moral capitalism and responsible government

* To ensure greater prosperity, sustainability and fairness in a global economy.

These are our overarching goals and priorities. They translate our vision into a concrete view of our direction and purpose.

We believe Moral Capitalism is the only system with the potential to reduce global poverty and tyranny and address the needs and aspirations of individuals, societies, and nations.

As Stephen Young, the Executive Director of the Caux Round Table has written, "the challenge of moral capitalism is to tip the balance of wealth creation toward humanity's more noble possibilities and away from the dynamics of more brutish behavior."

The Caux Round Table stands for movement from aspiration to action. We straddle the ideals of principles and of ethical concern for the common good and the practical needs of businesses and governments to "get it right" in their actions and decisions. To facilitate implementation of a more moral capitalism, the Caux Round Table provides decision-making guidelines in the form of principles for business, principles for governments, principles for NGOs, and principles for the owners of wealth. The Caux Round Table futher provides a comprehensive risk assessment approach to CSR and stakeholder relationships, Arcturus, and a way of encourageing individuals to reflect on their decision-making styles to move from self-centered frameworks to stakeholder frameworks in business and public policy decision-making. We also provide educational programs for company directors, CSR certificates, and handbooks on CSRT for small and medium size enterprises and on the practice of moral government.

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