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Human rights due diligence as risk management: Social risk versus human rights risk

Author: Björn Fasterling, Published on: 22 January 2018

"Human rights due diligence as risk management: Social risk versus human rights risk," 11 October 2016

The UN Guiding Principles on Business and Human Rights endorse a risk management perspective of human rights due diligence, which may create ambiguities with regard to the nature of risk and the objectives of risk management. By 'human rights risk' we understand a business enterprise's potential adverse human rights impacts. Human rights risk can be contrasted to an enterprise's 'social risk' which refers to the actual and potential leverage that people or groups of people with a negative perception of corporate activity have on the business enterprise's value...

This article puts forward the argument that due diligence in respect of human rights risk is conceptually incompatible with the management of social risk, because social risk management and human rights due diligence vary at each step of the risk management process (risk identification, risk measurement and assessment, risk reduction measures). To resolve this incompatibility, an effective integration of human rights due diligence processes into corporate risk management systems would require an elevation of human rights respect to a corporate goal that determines corporate strategy... 

[The articles concludes that] a persuasion strategy that emphasizes the notion that business-related human rights violations may represent costs to a business enterprise not yet accounted for could have some initial success, since some costs may indeed be unrevealed through greater attention paid to human rights... 

The second conclusion is that if business corporations managed human rights risk in order to serve the goal of respecting human rights and not to address possible repercussions of human rights violations on the corporation's value, they would effectively alter the corporate purpose... Value maximization would become subject to the responsibility to respect human rights and not vice versa...

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