Risk Management and Corporate Sustainability in Aviation

Triant G. Flouris, Ayse Kucuk Yilmaz

• Publisher: Routledge
• Year: 2016
• eBook ISBN: 9781317062820
• Topic: Business
• Subtopic: Business General
• Index: Business

Sustainability factors should be considered by managers like any other business risk issue; these factors are expected to have a substantial impact on corporate management. Air transport corporations need a strong sustainability management framework to effectively manage economic, environmental and social risks to achieve their corporate sustainability objectives, and to meet their stakeholders' demands. This book offers a new Enterprise Sustainability Risk Management (ESRM) model to fulfill these requirements. In the model presented, the triple bottom line (TBL) agenda is incorporated into the companies' sustainability management. ESRM deals with the environmental, social, and ecological risks as well as the strategic, economic, operational, and threat risks of companies. The best corporate sustainability strategies and management approaches require the consideration of all corporate risks in both a holistic and systematic way. Flouris and Kucuk Yilmaz present an effective way to manage sustainability risks via a new, well-designed, integrated, dynamic and flexible framework. It introduces an opportunity for turning risks into potential corporate advantages. Risk Management and Corporate Sustainability in Aviation is addressed to professionals, students and researchers within air transportation business management and risk management.

Chapter 1
Introduction to Corporate Sustainability: Enterprise-Wide Risk Management Approach to Contemporary Business Management and Organization

Continuous developments and changes in the business world require business planners to rethink the way they organize and manage their businesses for sustainability. Corporate Sustainability (also known as CS) has become a critical issue for today’s business organizations. Sustainability requires the corporate system to be improved on a regular basis. Successful businesses offer the most comprehensive crisis risk management programs on the market. Economic, social, and environmental issues are creating both risks and opportunities for businesses. The integrated practice of Enterprise Risk Management (also known as ERM) with Corporate Sustainability is becoming a fundamental principle of business management and organization.

Enterprise Sustainability Risk Management (also known as ESRM) is a necessity for a business which operates in a globally warmed business environment. The implementation of Enterprise Sustainability Risk Management provides a way to address all corporate risks in a timely manner. It introduces an opportunity to turn risk issues into advantages. This book is a guide for business managers on how to apply this advanced managerial approach to their own businesses. Also, Enterprise Sustainability Risk Management enables businesses to manage the risks and maximize the opportunities through identifying both key financial and non-financial stakeholders and establishing a relationship with them regarding sustainability issues.

Enterprise Sustainability Risk Management is an increasingly accepted concept and growing field in the global business world. Integration of the business world with society is one of the key points for Corporate Sustainability. Enterprise Sustainability Risk Management is core to the business strategy and practice in terms of both opportunities and risks.

Sustainability factors should be considered by managers like any other business risk issues. These factors are expected to have a substantial impact on corporate management. We believe that corporations need a strong sustainability management framework to effectively manage economic, social, and environmental risks; to achieve their Corporate Sustainability objectives; and to meet their stakeholders’ demands. Our book offers a new Enterprise Sustainability Risk Management model to fulfill these requirements. In this model, the triple bottom line (also known as TBL) agenda is incorporated into the sustainability management of the business (to control the economic, social, and environmental impact of processes and products).

Enterprise Sustainability Risk Management deals with environmental, social, and ecological risks as well as strategic, economic, operational, and threat risks facing businesses. The best Corporate Sustainability strategies and management approaches require consideration of all corporate risks in both a holistic and systematic way. Our book aims to provide an effective way for managing sustainability risks via a new, well-designed, integrated, dynamic, and flexible framework.

The Enterprise Sustainability Risk Management framework model provides many basic benefits which allow a business to ensure its sustainability. These include:

• managerial approaches and processes such as strategic planning, corporate governance, Human Resource Management (also known as HRM), the decision-making process, reputation management, crisis management, corporate resource planning and management, and financial risk management;

• shareholder acquisition;

• a systematic process for strategic and operational decisions at all levels in business;

• a holistic snapshot of economic, social, and environmental impact factors on Corporate Sustainability for both managers and personnel;

• the integration of economic, social, and environmental factors with strategic objectives according to the triple bottom line concept;

• an understanding of the interdependence between business, society, and the environment.

We envision that Enterprise Sustainability Risk Management will be a core competency for global business management and organization. The new Enterprise Sustainability Risk Management framework offers a flexible strategic approach to anticipating potential problems and resolving sustainability challenges through risk analysis, positive external engagement, and robust management systems.

Twenty-First Century: The Age of Global Awareness

We assume that regulatory changes, financial liabilities, and physical occurrences provide for the highest risks in regard to climate change as perceived by business managers. In the current business environment, reputation risks and litigation risks are considered less pressing by business managers. In addition, business managers have to respond to an increased level of stakeholder benefits, concerns, and close examination. This can be called Stakeholder Risk Management which is embedded in our Enterprise Sustainability Risk Management framework. Basically, the Enterprise Sustainability Risk Management framework is designed with consideration given to the following:

• Enterprise Risk Management

• Stakeholder Risk Management

• Corporate Reputation Risk Management

• Corporate Sustainability Management (also known as CSM)

• Environmental (internal and external) Management

• Value-Based Management

Enterprise Sustainability Risk Management aims to bridge the gap between the Risk and Corporate Sustainability concept in the Contemporary Business and Management field. Enterprise Sustainability Risk Management implementation will increase business managers’ trust in themselves regarding optimum management of the sustainability-based corporate risks. Corporate risks include those which are strategic, economic, social, operational, compliance-related, and tactical. Also, the Enterprise Sustainability Risk Management process enables consideration of environmental risks in addition to the other corporate risks as a strategic necessity in a complex fast-changing world and global business environment.

Enterprise Sustainability Risk Management is not just an operational issue, nor is it a financial, strategic, social, environmental, or a compliance-related one. It is a combination of all of them. Experiences in risk management practices show a common cause behind past failures of managing risks. Traditional risk management implementations were dominated by either the financial or operational side of business. The integrated triple bottom line was ignored. However, the implementation of Enterprise Sustainability Risk Management is essential to become and stay sustainable. Consideration of climate change-based issues is critical to survival of the world and corporations. Enterprise Sustainability Risk Management must be part of the corporate strategy and management system. Because of this, Enterprise Sustainability Risk Management tries to bridge the gap between Entity Risk Management and Corporate Sustainability Management. For this reason, Enterprise Sustainability Risk Management is a critical integral part of Contemporary Business and Management.

Since human resources are one of the important risks to business, we focus on Strategic Human Resource Management (also known as SHRM) in this book. For this, we have developed a new Human Factor Risk Management (also known as HFRM) model. We are aware that management of the human factor (also known as HF) is a very risky business, but it is also a very challenging one to both business and risk managers. We offer a well-designed, innovative, and flexible model to manage human resources efficiently in the globally warmed business world.

THINK AND DESIGN HOLISTIC, ACT PROACTIVE AND SYSTEMATIC:
Managerial Methodology to Corporate Sustainability
by Risk Management in Contemporary Issues in Business

This book deals with the main question, “How do we contribute to save both our world and businesses while ensuring Corporate Sustainability?” We assume that triple bottom line-based sustainability risks should be considered in the Corporate Risk Management process since these risks significantly affect the reputation, continuity, and resilience of a business. Businesses should adopt the global approach to be successful in their local business environment.

This book aims to raise awareness of climate change and invites the reader to act as a “global risk manager” to save both our businesses and our world. We are aware that life is a kind of risky business for all of us. This book also invites business managers to act as “sustainability risk managers,” achieving sustainability objectives by the effective implementation of Corporate Sustainability Management in their business organizations.

In our opinion, climate change is one of the important reasons for improving the context of Corporate Sustainability Management. Enterprise Sustainability Risk Management provides an efficient way to deal with climate change impacts on the business world. No business operates in an isolated environment, and Corporate Sustainability is embraced as an integrated and proactive management concept. Business organizations can become more sustainable by the implementation of corporate management systems. Enterprise Sustainability Risk Management is a necessity for business organizations to stay sustainable in the globally warmed business world. Enterprise Sustainability Risk Management tries to establish a balance between economic, social, and environmental objectives by minimizing threats and maximizing opportunities. For this reason, business managers should develop their sustainability strategy and process. Also, these efforts will strengthen our ability to save the world via climate change-based strategies.

Climate change is becoming one of the most important sustainability risks faced by humanity as a whole. Everybody has a responsibility in addressing this concept. We should all assume a related responsibility ourselves. We should act as “global risk managers.” We prepared this book as an indicator for our efforts in supporting sustainability awareness of climate change issues. Researching the risks and solution practices of global warming issues through industry–academy partnerships is also important to achieving desired results in global and local efforts to save the world.

To clearly understand the costs of climate change/global warming, we searched for answers to the following questions:

1. Is global warming a serious risk for corporations?

2. Do global warming-based factors create sustainability risks for corporations in view of economic, social, and strategic factors?

3. Can a sustainability management-based model applied to global warming issues provide an effective way for managers to achieve corporate objectives?

After our research in preparation for this book, we concluded that global warming presents both risks and opportunities which can create serious sustainability concerns for businesses. A sustainability management model will provide an effective framework for managers to use in addressing these concerns. Business managers must consider not only the financial, strategic, and operational risks of doing business but also the global warming-based risks of social, regulatory, and environmental factors.

Our book presents a holistic and fresh proactive way to manage the enterprise-wide sustainability risks. To go beyond compliance and legal liabilities, businesses have to integrate risk management-based philosophy and culture into core business functions of the company. Sustainability management will succeed only if managers and personnel recognize that the reforms create value for them. Cultural change within the context of an overall sustainability management system must be accomplished within the business in order to provide sustainability management-based benefits, seizing opportunities. The policies and objectives regarding climate change issues should be integrated into an overall sustainability management framework which is an integral part of the firm’s business strategy. Integration and a holistic approach are the key concepts for both a successful business and sustainability. The triple bottom line of economic, social, and environmental objectives in the sustainability concept requires more coordination between internal and external stakeholders of the business.

This book of readings in Enterprise Sustainability Risk Management is divided into eight main chapters. Chapters 2 through 7 include opposing views on Enterprise Sustainability Risk Management. First, the new Enterprise Sustainability Risk Management framework model, which we have developed, is presented. This book includes both a model and a risk score formula. These are related to both human factors and airline management. Also, three chapters in the book are derived from articles which are represented in collaborative works of authors from international conferences.

Chapter 2 includes the leading topics in both the “Corporate Sustainability and Enterprise Risk Management” fields such as risk and sustainability, Corporate Sustainability Management, Enterprise Risk Management, crisis management, and global warming. The definition and context of Enterprise Risk Management are given in this chapter. Sustainable business strategies are reviewed in this chapter. We focus on the triple bottom line concept as it relates to Corporate Sustainability. The relationship between Sustainable Development and risk management is reviewed in this chapter. Crisis management is related to risk management and is emphasized in this chapter. The Enterprise Risk Management process is revealed. We emphasize that the crucial point in the globally warmed business environment is Sustainable Business Performance.

Chapter 3 defines and lays out the framework for the new concept: “Enterprise Sustainability Risk Management.” We briefly discuss Enterprise Risk Management since companies recognize it as a critical management issue in the current globally warmed business world. Enterprise Sustainability Risk Management is designed as a managerial system and related approach which is used by organizations to manage risks and seize opportunities related to the achievement of their sustainability objectives, in terms of the triple bottom line concept. Enterprise Sustainability Risk Management provides a framework for optimum risk management.

In this chapter, the new Enterprise Sustainability Risk Management conceptual model is offered as the specific management and organizational system to both manage and integrate the corporate goals in order to create economic and financial value and awareness of environmental and social responsibility. Enterprise Sustainability Risk Management has been developed as an important mechanism to improve Corporate Sustainability performance. Enterprise Sustainability Risk Management has a holistic and proactive perspective. Enterprise Sustainability Risk Management provides potential advantages for corporations. It can protect, create, and enhance business value through measurement and management of sustainability threats and opportunities. In addition, this can help businesses to effectively respond to the growing expectations of corporate stakeholders. In the globally warmed business environment, Enterprise Sustainability Risk Management is a necessity for corporations to become and stay sustainable. Enterprise Sustainability Risk Management takes into consideration Corporate Sustainability. For this reason, the new Enterprise Sustainability Risk Management conceptual model is based on the triple bottom line. The drivers of Enterprise Sustainability Risk Management are given in this chapter.

The Enterprise Sustainability Risk Management framework is designed to provide guidance to managers on how to establish a holistic and systematic sustainability risk management process that generates the risk indicators, risk sources, objectives, and reporting systems needed to ensure effective handling of sustainability risks and improved overall organizational performance and value.

The Enterprise Sustainability Risk Management conceptual model offers a strategic road map, which provides a contextual framework for businesses serious about taking on the challenges and opportunities of Sustainable Development.

The process of the Enterprise Sustainability Risk Management conceptual model is given in the remainder of Chapter 3. This process is composed of five main phases and their sub-steps. The main phases are:

• Phase 1: Strategic zanagement: Strategic Plan and Orientation

• Phase 2: Management and Organization: Organizational and Infrastructural Orientation

• Phase 3: Framework Set up: Establishment and Framework Orientation

• Phase 4: Report and Monitor: Internal Control Orientation

• Phase 5: Enterprise Sustainability Performance Optimization: Corporate Orientation

Chapter 4 is about “The Economics of Global Warming” and includes discussion on ways to help “save the world!” The core global risks which are identified by the World Economic Forum in 2007 are listed in this brief chapter. Via this chapter, we aim to make a little contribution to the debate over global warming in order to advance related awareness levels. Economic problems and advantages of global warming are briefly discussed.

Chapter 5 focuses on “Global Warming and Sustainable Aviation”. Sustainable Aviation (also known as SA) and the challenges of achieving sustainability are reviewed in this section. Environmenta...

Table of contents

• Cover
• Dedication
• Title page
• Copyright Page
• Contents
• List of Figures and Tables
• Foreword
• Acknowledgments
• 1 Introduction to Corporate Sustainability: Enterprise-Wide Risk Management Approach to Contemporary Business Management and Organization
• 2 Corporate Sustainability and Enterprise Risk Management
• 3 The Enterprise Sustainability Risk Management Conceptual Model: A Holistic and Proactive Perspective
• 4 The Economics of Global Warming
• 5 Global Warming and Sustainable Aviation
• 6 Modeling Human Factor-Based Risks in Aviation
• 7 Risk Management, Change Management, and Effectiveness in Aviation Operations
• 8 The Integration of Sustainability Risk into Airport Business and Management
• Concluding Remarks
• References
• Index