BLIHR | Step 3

STEP 3: Identify the risks, responsibilities and opportunities for your sector

Risk Management

Types of Risk

There are many types of business risk – ranging from operational and project risk in specific locations, financial risk, reputational risk associated with perceptions of the business and its brand, legal risk and maintaining the social licence to operate.

How Risk is Managed
Risk management should be managed to meet the expectations of rights-holders (workers, customers and local communities) and other key stakeholders (such as business partners and investors). Business risks are heightened in parts of the world where governments are unwilling or unable to perform their normal role of protecting the rights of all their people. The responsibility of a business to respect human rights requires that business undertakes due diligence to understand its risks and impacts.

Responsibility

A proactive approach to managing risk and impact can lead to business taking a position of responsibility for respecting human rights.

There are a number of multi-stakeholder initiatives that can help a company understand how it should frame and understand this responsibility in relation to specific business sectors. These include:

Ethical Trading Initiative
Fair Labor Association
Voluntary Principles on Security and Human Rights
Electronics Sector Code of Conduct
Extractive Industry Transparency Initiative
Global Network Initiative

This Guide contains a Business and Human Rights Matrix that helps companies understand the essential steps they should take to meet the minimum requirements of responsibility. In addition, there are the ‘beyond essential’ actions that a business can take based on specific sector and national human rights initiatives.

Opportunity

Human rights within a company are first and foremost a responsibility, but they can also represent an opportunity for business. There are a number of areas in which this can be the case:

Opportunity from Managing Risk
Enabling companies to continue operations in areas of poor governance or particular human rights sensitivity through the successful management of social and political risk. For example, this might be the case when developing infrastructure projects in certain parts of Africa.

Opportunity in Relation to Market Access
Another possible area of opportunity relates to market access. The role of business in the provision of public goods such as the provision of energy, transport or water remains contentious in parts of the world where communities are concerned about their access to basic needs. Human rights are increasingly used by companies to open a dialogue and understand the expectations of local communities as well as international stakeholders (such as Non-Governmental Organisations (NGOs) and investors).

Opportunity Relating to Products and Customers
Large groups of people can be excluded as a result of their ethnicity, gender, disability or age. Human rights can broaden the opportunity by encouraging companies and their partners to think about all consumer groups including those of the lowest income. This includes product development in such areas as information technology, mobile communications or micro-finance.

Access to Capital
Public and private sources for major project finance are increasingly likely to make capital available to businesses with strong records of responsible management of human rights issues.