Risk Management, Ethics and Social Responsibility
What a candidate must understand
Risk management is the systematic identification, assessment, treatment and monitoring of risks. Distinguish pure risk (only loss or no loss-fire, theft, liability) from speculative risk (possible gain or loss-market entry, new product). Know the risk treatment options: avoid, reduce (mitigate), transfer (insurance, contracts), and accept (retain). A risk register records each risk, its likelihood, impact, owner and response.
Common categories include market risk, financial risk (liquidity, credit, currency), operational risk, legal and regulatory risk, strategic risk, and reputational risk. For Bulgarian ventures, currency exposure, regulatory change and dependence on a few large customers are frequent concerns.
Business ethics concerns right and wrong conduct in commercial decisions: honesty in marketing, fair treatment of employees, avoidance of bribery and conflicts of interest, and data protection. Corporate social responsibility (CSR) is the voluntary integration of social and environmental concerns into operations-philanthropy, ethical sourcing, environmental footprint, community engagement. Understand the difference between legal compliance (a minimum) and ethical conduct (which can exceed legal requirements) and between CSR and greenwashing.
Traps in questions
- Treating risk management as purely insurance; mitigation and avoidance are also treatments.
- Confusing pure and speculative risk.
- Assuming ethical behaviour always reduces profit; trust can lower transaction costs and build brand value.
- Confusing CSR with public relations; CSR requires substantive action.
Worked example / rule of thumb
A small exporter depends on one customer for 60% of revenue. Likelihood of loss is moderate, impact is severe. Options: reduce (diversify customers), transfer (credit insurance), or accept (build a cash reserve). Rule of thumb: prioritise risks by likelihood × impact, and always document the chosen response and its owner.