The ACCA has published a fascinating paper covering a massive amount of topics, including risk, the pursuit of profit, ethics and sustainability.  Called "Risk and reward: tempering the pursuit of profit", it probes the apparent inconsistency between the pursuit of profit at all costs and the concept of sustainability.  The authors attempt to deal with this by aligning sustainability with sensible risk management, which translates it into a slightly less intractable problem - how do you ensure that profit-making isn't at the expense of excessive risk taking?  That's more obviously a behavioural problem, and the paper looks at how those problems can be addressed.

This is somewhat reminiscent of John Kay's recent book Obliquity: Why our goals are best achieved indirectly, which suggests that the pure pursuit of profit may lead to bad outcomes.  Conversely, the most successful companies are those that focus on other things, such as customer service or product quality.  In the context of the crisis, the ACCA makes the case well - it's sort of obvious that when times are tough, people take more of an interest in risk management, but when there are profits to be made they'll put it back in its box.

The paper also, correctly, observes that regulation doesn't always work as intended.  This is particularly true if regulation is seen as a compliance activity or, worse, a list of rules to be followed without common sense.

This is a rich paper, which covers a lot of areas.  There's a section on business ethics, rather reminiscent of the ICAEW's paper on integrity in financial reporting, and another section on the thorny issue of how to enforce rules and principles.  This chapter suggests that, although principles are generally to be preferred to rules, you can't just dump principles-based regulation onto businesses that are used to complying to the letter of rules.

This is a fascinating introduction to lots of intriguing philosophical topics.  The ACCA has really upped its game on this publication, and it'll be interesting to see how they follow up the strands they've started here.

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Filed under: Corporate governance, Ethics, Institutes with tags acca, icaew, john kay, principles, risk reporting, sustainability