Corporate Social Responsibility and Risk Management in Property Projects

Introduction

This chapter presents a background of the study, rationale for the selected topic, a brief exploration of the principles of corporate social responsibility (CSR), the relationship between CSR and risk management (RM), aims and objectives and an outline of the research methodology employed in the study.

Background

Corporate social responsibility (CSR) is a way in which organizations integrate economic, social and environmental concerns into their decision making, culture, values, operations and strategy in a transparent and accountable manner and thereby, create wealth, establish better practices and improve the society (Dunphy et al, 2003, p. 5). Grant (2009, p. 16) defines CSR as engagement in beneficial activities that do not have negative effects on the economic, social and natural environment surrounding businesses and individuals presently and in the future. As such, an organization embracing CSR upholds three main principles, namely, economic sustainability, environmental sustainability and social sustainability. As Beth and singh 2005, p. 12) point out, CSR principles enhance broad engagement of stakeholders in organizational activities and enhances the reputation of an organization in the eyes of stakeholders. Importantly, embracing CSR principles enhances the ability of an organization to effectively manage economic, legal, social, environmental and other risks. Precisely, CSR is related to RM by providing intelligence about the potential risks and by offering an effective means for responding to these risks (Smith, 2010, p. 20).

As Walesh (2000, p. 135) explains, RM is part of project management carried out within organizations. Project management is the application of techniques, knowledge, skills and tools to a range of activities that constitute a project with a central aim of meeting or exceeding the expectations and requirements of the stakeholders. According to Walesh (2000, p. 135), in order to meet or exceed the requirements or expectations of stakeholders, project management has to keep balance between the time, resources, quality and scope of the project in question. These elements interact with each other in a way that makes each process meant to give a desired outcome unique. The unique process leading to a desired outcome is called a project.

Sometimes, these elements interact to form systems or projects that are complex and dynamic within organizations. To achieve successful outcome in such projects, organizations select project managers to deal with specific issues such as risks, human resources, finance, communication and technical issues. Dominelli’s (2011, p. 432) explains that all risk management activities carried out at top management level of a project should make consideration of interests of internal and external stakeholders. Organizational stakeholders with interest in the performance of organizational projects include shareholders, customers, suppliers, employees, communities, governments, international organizations, non-governmental organization and others affected by a firm’s activities. By giving consideration to the interests of the stakeholders, the top management would ensure that a project attains success and is secure from adversity that would occur as a result of ignoring their contribution (Lawrence, 1998, p. 232). Therefore, CSR principles are relevant to RM in property projects.

Rationale for the topic

Numerous scholars have paid attention the connection that exists between CSR and RM in organizations. However, there is limited literature focusing on the relevance of the connection between CSR and RM in projects. Risk in project management implies the possibility of harm arising from an activity or the possibility that a project might not progress in the future. As Edwards and Bowen (2005) explain, there has been increasing need to establish the potential risks that are related to projects in order to find ways to mitigate or avoid them. According to Bourne (2007, p. 2), the success of a project relies on three pillars, namely, management of uncertainty, maintenance of project relationships and delivery of value. To achieve success, there is need for alignment of the performance metrics and management of the project to the perceived requirements by the stakeholders. Alternatively, this step may involve negotiations within the established relationships so as to align the perceived requirements with the feasible outcomes of the project. As Bourne (2007, p. 2) explains, the three elements need to be combined together for a project to attain success as indicated in figure 1.

Figure1. A balanced view of success; the pillars of project success

177165039370 Managing relationships

-Managing stakeholders’ expectations

Managing relationships

-Managing stakeholders’ expectations

-257175115570Delivery Value

-Time, cost, scope and

quality

Delivery Value

-Time, cost, scope and

quality

2114550259080Stakeholders

Stakeholders

1181100259080

Managing risk

Given that CSR helps to alleviated risks at organizational level, it also possible that CSR can help to mitigate risks at project level.To investigate this issue, this paper focuses on the relevance of the connection between CSR and RM in property project.

Indicative Literature

CSR principles

Economic sustainability implies the application of various organizational strategies that lead to utilization of available resources to the best advantage of an organization, all stakeholders and the natural environment (Wells, 2010, p. 67). Overfishing, for instance is an activity that cannot be regarded as been economically sustainable. Thus, economic sustainability refers to the use of resources in the most efficient responsible way in order to ensure long-term benefits. Environmental sustainability implies the movement towards the use of renewable rather than non-renewable resources and the minimization or elimination of polluting and hazardous wastes (Wells, 2010, p. 67). The recycling of waste products that pollute the environment such as plastic paper bags is an activity that is sustainable in the long-term. Social sustainability on the other hand refers to creating and maintaining quality of life for all. By respecting ethical principles while dealing with human beings and working towards economic and environmental sustainability, an organization is already working towards social sustainability (Wells, 2010, p. 67).

Relationship between CSR principles and RM

An o embracing the principles of CSR generates investor confidence, attract funding and escape from risks associated with financing. As Smith (2010, p. 21) explain, CSR principles focus on increasing profitability and enhancing efficiency in an organization. This helps to create wealth and other benefits for shareholders. The level of accountability, probity and transparency that an organization has influences investors and potential investors to accept the organization as a caring, honest and legitimate wealth creating organ. This helps to improve organizational reputation, image and market standing (Grant, 2009, p. 76). This helps to assure investors that their will be secure and well managed and will generate wealth for them. Therefore, an organization embracing CSR is able to attract funding and to shield it self from potential financial risks. In the same vein, it is also vital for individuals involved in project management to take into account the perception of the stakeholders to the value of a given project.

On the contrary, failure to embrace CSR principles makes an organization vulnerable to financial distress or financial risks in the future. Frederikslust et al (2008, p. 75) noted that failure to embrace CSR principles may lead to risky financing patterns, poor organizational performance and increased exposure to non-conducive macroeconomic crises. This leads to loss of investor confidence and inability to attract sufficient funding. Without sufficient funding, an organization is exposed to the risk of liquidation (Wells 2010, p. 59). Generally, this applies to both organizations and projects that are undertaken within organizations. Therefore, CSR is crucial to the performance of a project.

Aims and Objectives of the Study

The main aim of this study is to establish the relevance of CSR in RM in Property Projects

The specific objectives of the study are

To determine the relationship between CSR and RM

To determine the effects of CSR engagement on the reactions of stakeholders

to determine the effects of CSR on projects performance

To determine the relevance of the relationship between CSR and RM in property project

Research Methodology

Research methodology refers to way and manner in which a study is conducted and includes all the methods used to carry out research within the social and natural sciences (Creswell, 2003, p. 42). In this study, the researcher has adopted an exploratory research design and qualitative methods of data collection and analysis. This research relied on conceptualization and empirical phases respectively. During the first phase, relevant literature to the topic of study was reviewed and the tools of data collection, particularly interview schedules, developed. During the second phase, data was collected from the selected participants and then analysed according to content validity and in regard to the set objectives of the study.

The study used both secondary and primary data. Secondary data was collected through exploration of available books and journals from school and online databases related to the relevance of the connection between CSR and RM in property management. Primary data was collected through interviews which were conducted on directors or managers of the selected property projects in various firms. Only one interview schedule was used to collect data from all respondents. The researcher used open-ended questions to obtain extensive information from the respondents. The researcher found interviews to be the best data collection method for this study since it allowed him to collect large volume of information in a short time and on a limited budget. The interviews were made short in order to encourage participation.

References

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