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RISK MANAGEMENT AND

BUSINESS ETHICS: RELATIONS
AND IMPACTS IN THE GCC
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International Journal of Civil Engineering and Technology (IJCIET)
Volume 10, Issue 10, October 2019, pp. 489-504, Article ID: IJCIET_10_10_047
Available online at http://www.iaeme.com/ijciet/issues.asp?JType=IJCIET&VType=10&IType=10
ISSN Print: 0976-6308 and ISSN Online: 0976-6316
© IAEME Publication

RISK MANAGEMENT AND BUSINESS ETHICS:

RELATIONS AND IMPACTS IN THE GCC
Prof. Saad Darwish
Kingdom University, Kingdom of Bahrain

Marwan Mohamed Abdeldayem

Cairo University, Egypt and College of Administrative Sciences,
Applied Science University (ASU), Kingdom of Bahrain
Email: Marwan.abdeldayem@asu.edu.bh

ABSTRACT
The purpose of this study is to examine the relationship between risk management
and business ethics in the GCC region. The financial crises and the scandals of big
corporations because of unethical issues raised awareness about the significance or
compliance with business ethics in business entities. It becomes clear that unethical
actions may have a devastating impact on business in terms of reputation loss and
financial fines imposed by regulatory bodies. This suggests that business ethics risk
must be considered with due care by business organizations. In this sense, business
ethics are linked to risk management.
In this study, we utilized a questionnaire survey that was directed to 970
individuals from five different Gulf countries namely: Bahrain, Saudi Arabia, Kuwait,
Oman and UAE. The research instrument consists of 16 different items that measure
the main dimensions of risk management and business ethics. We tested the reliability
of the questionnaire using Cronbach Alpha. The overall reliability of the
questionnaire is 0.792 and the reliability levels for the main dimensions of both risk
management and business ethics were found to be satisfactory. The findings reveal
that ethics has a strong relationship with risk management in the sense that an
effective and efficient risk management cannot be achieved without ensuring ethics
compliance by all parties involved. All managers of an organization must maintain
ethicality to ensure other employees follow their steps. Business ethics risk
management must be based on a solid model that covers the steps of identifying,
assessing and facing ethical risks. Notably, the study indicates that compliance with
business ethics risk management ensures the sustainability and profitability of the
business throughout the GCC region.
Keywords: Risk, Risk Management, Business Ethics, Risk Assessment, Ethics Risk
Management, GCC

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 Saad Darwish and Marwan Mohamed Abdeldayem

Cite this Article: Saad Darwish and Marwan Mohamed Abdeldayem, Risk
Management and Business Ethics: Relations and Impacts in the GCC. International
Journal of Civil Engineering and Technology 10(10), 2019, pp. 489-504.
http://www.iaeme.com/IJCIET/issues.asp?JType=IJCIET&VType=10&IType=10

1. INTRODUCTION
Max Weber once said that entrepreneurs could only be successful if they had a clear vision,
energy and ethical qualities (Weber, 2015). Ethics are thus an indispensable factor in the
success of the business. However, it seems that some modern businesses do not give much
care to ethical considerations and inflict the world with massive unethical occurrences that
result in unfavorable consequences such as the financial crises that are accompanied by
depression and have a devastating effect on individuals, corporations, and countries as a
whole. In fact, the extensive research that was conducted to investigate the causes of the
economic crisis of 2007-2008 identified that risk managers of the financial industry are main
contributors to the crisis. The financial crisis revealed the significant weaknesses in their risk
management practices (Paape & Spekle, 2012). They tended to treat all financial risks as safe
and manageable based on their calculation of risk based on figures and numbers. Thus, the
fact that the financial crisis took place in spite of the positive numerical indicators suggest that
risk calculation must not depend solely on financial benefits; it must take into consideration
ethical issues (Abdeldayem and Nekhili, 2016, Luetge & Jauernig, 2014: Darwish & Asooly,
2009). In order for risk management to be effective and efficient, it must cover business
ethics.
Also, the entity’s compliance with business ethics decreases risks threatening the business
entity. Unfortunately, a lot of businessmen consider ethics as a stumbling block in their way
to achieve profit maximization. This belief can be partially justified by the fact that business
expansion cannot be actually achieved without taking risks (Brustbauer, 2014). Thus, for
ethics to promote business, it should encourage risk-taking and the entrepreneurial spirit.
Although the relationship between risk management and business ethics is undisputed, the
nature of such a relationship needs further examination. In an attempt to identify how business
ethics affect risk management and vice versa, an exploratory investigation was conducted. A
number of past studies have been examined to first, provide an understanding of the concepts
of risk management and business ethics, their history and significance and to reach a
conclusion on the mutual relations and effects between risk management and business ethics.

2. THEORITICAL FRAMEWORK AND LITERATURE REVIEW

The following is a synthesized review of past studies on risk management and business ethics.
Then, the relationship between risk management and business ethics will be explained in
terms of mutual impacts. The part on risk management explains, in brief, the definition and
concept of risk management, classification of risk and significance of risk management. The
part on business ethics includes definition, concept, and advantages of compliance with
business ethics to the business organizations. The relationship between risk management and
business ethics is explained in detail with an elaboration of the bases of ethics management
models. In addition, ethics risk management and assessment are explained.

2.1. Risk Management

The literature included many definitions for the terms risk. Risk can be defined as an event
that “implies uncertainty of profits or danger of loss due to some unforeseen events in the
future” (Toma & Alexa, 2012, p.110). It is also defined as the uncertainty of economic and

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 Risk Management and Business Ethics: Relations and Impacts in the GCC

financial results or the corporate performance (Caldarelli et al., 2012). However, the risk is
different from uncertainty in some sense. For example, there is a risk when you do not know
for sure what will happen, but uncertainty is when you do not even know the odds of what
will happen (Hermans, Fox, & Asselt, 2013). Also, the risk is measurable according to this
formula: risk = chance× effect, while uncertainty is immeasurable (Hermans et al., 2013).
From the above explanations, it can be concluded that risk is a measurable uncertainty about
the future with an understanding of the results and consequences of possible future
occurrences.
There is no one agreed upon definition for risk management as literature state many
definitions that deal with risk management from different aspects. For example, risk
management can be defined as “the process of the identification, assessment, and
prioritization of risks monitored by organized and efficient use of resources to lessen, monitor
and control the probability or impact of disastrous events” (Anwar, 2017, p.2). Risk
management includes risk identification, assessment, evaluation, control, and monitoring. In
this sense, risk management can be defined as “a set of financial or operational activities that
maximize the value of a company or a portfolio by reducing the costs associated with cash
flow volatility” (Dionne, 2013, p. 8). As such, risk management is the discipline concerned
with forecasting future threats and developing plans to face or eliminate such threats.

2.2. The Concept of Risk Management

The concept of risk management appeared after the Second World War. More specific,
modern risk management is dated back to 1955-1964 when academic books on risk
management emerged including two books that were published by Mehr and Hedges (1963)
and William and Hems (1964). It was until the eighties that the risk management theory was
limited to terminological elaborations and technical consideration that is built on theories of
finance and shed some light on behavioral insights (Caldarelli, Fiondella, Maffei, Spanò, &
Zagaria, 2012). In the 1990s, international regulations of risk were formulated; thus, risk
management took a global scale. The field has been developing substantially since then.
Sophisticated techniques and approaches have been developed (Aven, 2016). Recently, risk
management became the means for all business organizations, international and global, to
mitigate all kinds of risks including interest rate risks, product development risks, foreign
exchange risks among others (Abdeldayem and Darwish, 2018, Anwar, 2017; Darwish,
2015). The field of risk management has been subject to great development since it first
appeared in the forties of the twenty century.
Risk management aims to create a framework that enables companies to manage risks and
uncertainties. In general, risk management has two main aims: to handle risks of specific
activities using assessments and management practices and to research and develop risk-
related concepts, theories and approached to provide deeper and wider understanding of
different risks (Aven & Zio, 2013). The second aim indicates that risks do exist in different
types and each must be managed in a suitable way.

2.3. The Significance of Risk Management

Because conducting business normally involves risk, risk management has gained great
significance for corporations and entrepreneurs. Many studies have identified the positive
effect of efficient risk management on the performance of organizations (Olamide,
Uwalomwa, & Ranti, 2015). It is indicated that companies who give due attention to risk
management achieve better performance than others who are not much concerned about
managing risks (Gates, Nicolas, & Walker, 2012). usiness organizations face great
competition in this era, which necessitates the presence of risk awareness. In order to keep the

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 Saad Darwish and Marwan Mohamed Abdeldayem

business, they must be fully aware of the threats that are likely to occur because of the fierce
competition. Also, globalization and technological advances created new kinds of threats to
business organizations. Therefore, they need a comprehensive process that works in a
constant and formalized manner in integration with the operations of the organization with the
sole aim of mitigating risks, which is risk management (Spikin, 2013). In this sense, risk
management must work on two aims: to prevent damages and foresee opportunities.

2.4. Business Ethics

Ethics is defined by The Ethics Institute as the good or right in human interaction and it
contains three central concepts: self, good, and other (Rossouw & Vuuren, 2014), as shown in
figure 1 figure:

Figure 1 Aspects of Business Ethics

Figure (1) shows that the aspects must be considered to ensure ethics are maintained
appropriately. “Business Ethics” is a concise term indicating a wide field that covers a vast
range of normative issues in the business world. Briefly, it is a set of principles about the way
individuals and firms should behave in the world of commerce. Business ethics are concerned
with the good/ bad and right/ wrong behavior towards all stakeholders in a business
(Schoeman, 2014). It is about the moral aspects of practices taking place in a business
context. For example, social responsibility is one of the ethical aspects of ethical compliance
of a business entity (Nwanji, 2016). In this sense, business ethics can be defined as a number
of ethical rules and values that affect the attitude of individuals or groups concerning what is
right and wrong in decision-making and practices (Schoeman, 2014). It also provides
approaches to solve ethical dilemmas in business corporations.

2.5. The Concept of Business Ethics

The concept of business ethics has always existed; however, in the last decade of the
twentieth century, business schools grew exponentially and started to respond to social
demands to teach ethics. Subsequently, the leading scholarly organization such as the Society
for Business Ethics and the Association for Practical and Professional Ethics in the United
States were established in 1980 and 1991 (Norman, 2013). In the past Ducker (1981), the

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 Risk Management and Business Ethics: Relations and Impacts in the GCC

founder of modern American management stated that the concept of business ethics is
included within all other types of ethics. He elaborated that “all authorities of the Western
tradition – from the Old Testament all prophets continuing the way to Spinoza in the
seventeenth century, to Kant in the eighteenth century, Kierkegaard in the nineteenth century
and, in this century, the F.H. Bradley (1927) (Ethical Studies) or the American Edmond Cahn
(1955) (The Moral Decision) – are, however, in complete agreement on one point: There is
only one ethics, one set of rules of morality, one code, that of individual behavior in which the
same rules apply to everyone alike” (Romar, 2004). This universal perception of ethics
stresses the significant role ethics compliance plays in this globalized era. There have been
always a need for ethics, values, and transparency in a business context. However, these
concepts are increasingly needed in the modern era of technological advancement and the fast
spread of information. Not to forget how Islam draw a clear set up for moralities in the
sociological discipline. It is glaring that all religions concentrated on ethics as the cornerstone
for building happy which consequently reflect on business.

2.6. Advantages of Business Ethics to Corporations

Business ethics offer many advantages to businesses. It is pointed out by many studies that
business ethics enhance business performance and operational practices (Vig & Dumicic,
2016). Some researchers suggested that ethics compliance is a good investment for all
businesses as it has a positive effect on the relationship among all stakeholders by promoting
trust, which has positive long-term results (Vig & Dumicic, 2016). Some of the main
desirable impacts of the business compliance to ethics are enhanced reputation, more positive
corporate image (Johnson, 2018), and sustained customer loyalty, which gives the company
competitive advantage against less trusted competitors (Vig & Dumicic, 2016). It is also
indicated by studies that the ethical commitment of the company enables it to achieve the high
satisfaction of all stakeholders, which reflects positively on its financial results. When
companies comply with ethical values, they avoid the uncertainty of the future performance
and risks in the long run (Johnson, 2018). In this way, the company is able to attract more
investors. Regarding the internal environment of corporations, research indicated a positive
relationship between the company’s compliance to ethical regulation and the employees’ job
satisfaction and trust in the entity, which is reflected on the employees’ loyalty (Nafei, 2015).
Overall, a strong commitment to business ethics creates positive and healthy organizational
culture, which guarantees a greater willingness to eliminate misconduct in general.

2.7. The Relations between Risk Management and Business Ethics

Recently, the association between business ethics and risk management have been highlighted
by the increasing awareness of people of ethical concerns in business. The global economic
and financial history is abundant with different corporate scandals that drew citizens’
attention to the devastating effect of ethical risks on the economic status of a corporate or a
country as a whole. Scandals like the Ford Pinto Case in the 1970s, the Madoff investment
fraud, the Fukushima Nuclear Disaster, the WorldCom and Lehman Brothers led authorities
and regulators to implement strict legal penalties for violating ethics laws and regulations
(Spikin, 2013). The severe consequences of ethical violation gave rise to more sophisticated
risk management practices. Businessmen must consider not only the legal punishment of their
unethical conducts but also the heavy financial loss and reputational harms that are likely to
result from such acts. As such, ethical risks must be considered with due care by all business
organizations, especially in the current globalization era.

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 Saad Darwish and Marwan Mohamed Abdeldayem

2.8. Classification of business ethics risks

Literature is abundant with the different classification of risk. The below are some of the most
common classifications:
Financial and non-financial risks (economic and non-economic risks): financial risks
involve financial loss. It mainly involves three factors: the individual or the entity that is
likely to suffer loss, the asset or income that is exposed to destruction, which causes financial
loss, and a threat that is expected to cause the loss. On the other hand, non-financial risks are
those that do not lead to direct material loss but has a massive impact on business on the long
run such as compliance failures, misconduct, technology, or operational challenges (Spikin,
2013). In this sense, ethics risk can be considered non-financial risk when it leads to
reputational loss. It may also be considered a financial risk when a fine is imposed on the
company.
Dynamic and Static risks: this classification considers the source of the risk. The dynamic
change in the economic environment would pose a dynamic risk. This type of risk is affected
by external variables including the economy, competitors, industry membership and
consumer. On the other hand, static risks are based on the competitive environment where the
company operates and are affected solely by the internal factors of the organization. While
dynamic risks are unpredictable to a large extent, static risks are predictable (Borghesi &
Gaudenzi, 2013). In this sense, ethics risks are static risks.
Systematic and Diversified risks: systematic risks are resultant from the main
macroeconomic variables including the general tendency of the economy and the trend in the
market interest rates and rates of inflations. On the other hand, all other risks that are not
associated with sources of systematic risk are diversifiable (Spikin, 2013). Ethics risks are,
thus, diversifiable risks.
Technical and economic risks: technical risks are attributed to the utilization of production
technology and economic risks are linked to the economic-business activity (Borghesi &
Gaudenzi, 2013). It means that technical risks are that related to the technical aspects of the
product, while economic risks mean the inability to sell the product even if it is technically
perfect. As such ethics risks are economic risks.

2.9. The Role of Ethics in Risk Management

Ethics risk is one type of risk such as the legal, operational, IT, finance risks. Ethics risk can
be defined as “the current or potential organizational beliefs, practice, or behaviors (conduct)
that either support (upside risk or opportunities) or are in contravention (downside or negative
risk) of organization-specific standards for desired behavior, and/ or in contravention of
legitimate stakeholder rights and expectations. This could negatively impact other key
organizational processes and undermine the sustainability of the organization downside ethics
risks, both internal and external, may undermine the achievement of an organization’s
strategic goals; by the same token, upside risks may facilitate the achievement of strategic
goals”. Unmanaged ethics risk will have devastating consequences for the organization
including reputational and financial losses (Vuuren, 2016). The role of ethics in risk
management is described by; The Committee of Sponsoring Organizations of the Treadway
Commission (COSO) as follows (Nelson, 2013, p. 9):
“An entity's strategy and objectives and the way they are implemented are based on
preferences, value judgments, and management styles. Management's integrity and
commitment to ethical values influence these preferences and judgments, which are translated
into standards of behavior. Because an entity's good reputation is so valuable, the standards
of behavior must go beyond mere compliance with the law. Managers of well-run enterprises

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 Risk Management and Business Ethics: Relations and Impacts in the GCC

increasingly have accepted the view that ethics pays and that ethical behavior is good
business.”
Also, it is imperative for risk management strategies to consider ethics and morals and
risk managers should understand the positive impact that ethical conducts has on the
company’s reputation and sustainability. Ethical issues can damage the company’s reputation,
which will lead to reduced sales. Such cases have actually happened such as Arthur Andersen,
which lost the whole business because of the Enron scandal in 2001, which devastated their
reputation. Also, Toyota and Godman Sachs incurred severe reputational losses in 2010
(Silverstein, 2013). In fact, reputation risk management emerged as a byproduct of
globalization. In June 2013 Forbes magazine stated that “Reputation management is the new
black of corporate strategy” (Rogers, 2013). Reputation risk is now the most threatening
strategic risk facing large companies. Although reputation risk is intangible, meaning “an
identifiable non-monetary asset without physical substance” (IFRS, 2012), it has the most
destructive impact on the business especially when it is associated with ethics violations.
The sustainability of the business depends mainly on its ability to manage risks in the
short and long run. Today, business entities allocate great importance to all types of
sustainability including production, resources, supply chain, innovation, and marketing (Belz
& Peattie, 2012). Notably, sustainability is also concerned with the ethical risks that may face
the business organization. In fact, big corporations are more likely to face ethical threats
including corruption, discrimination, among others. If ignored these problems will eventually
cause economic problems in several ways. Another way by which corporation can be affected
by ethical issues is the fines they will have to pay for beaching certain laws and standards. An
example of such fines is the case of Siemens who paid around one billion Euros because of its
corruption scandal. Another example is the case of ThyssenKrupp who was forced by the
European Commission in 2007 to pay about half a billion Euros because of the scandal of
illegal price fixing (Luetge & Jauernig, 2014). Noncompliance with ethics in the organization
context has a very negative effect on the business; therefore, any risk management to be
effective and efficient must take into consideration risks associated with business ethics.
On the other hand, it is not only that noncompliance with business ethics has bad
consequences; compliance with business ethics promotes businesses in many ways. A
successful ethical risk management strategy contributes to increasing social, environmental
and financial gains (Caldarelli, Fiondella, Maffei, Spanò, & Zagaria, 2012). Organizations
face two main challenges concerning business ethical risk management: first, there is no
across the board rules for defining the good, which means a common understanding of the
good and achieving a balance between what is good for the person him/ herself and what is
good for others (Vuuren, 2016). Therefore, a best-practice approach is essential for effective
and efficient business ethical risk management.
For helping a company to ensure that it is committed to ethical rules and regulations,
scholars have developed many risk management models. These models are useful for
establishing an ethical organizational culture based on specific values and implementation
methods (Vig, 2014). In general, ethics models must be based on specific principles to guide
ethical decisions. Kantian and deontological ethics may serve as a firm base for such a
principle. Thus, the following Kantian and deontology- based ethics should be taken into
consideration while formulating a risk management model (Jamnik, 2017):
 Justice: this principle has two sides: to refrain from doing injustice and to correct the injustice
taking place.
 Do no harm: no one should harm another person and selfishness must be fought.
 Loyalty: all promises must be kept.

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 Saad Darwish and Marwan Mohamed Abdeldayem

 Credibility: truthfulness begets trust and lies do not last. Everyone should acknowledge their
mistakes.
 Liability: everyone must bear the consequences of the harms done by him/ her and must take
corrective actions to compensate the harmed party.
 Charity: solidarity and common good should be regarded highly.
 Personal growth: employees’ self- initiative is important as the organization growth because of
the sense of responsibility and personal efforts of all the staff.
 Gratitude: praising others and their success promotes positivity in an organization. on the
other hand, jealousy and envy destroy interpersonal relationships and thus affect the business
negatively.
 Freedom: respecting one’s personal freedom and dignity are key to ensuring employees’
loyalty. However, freedom means that a person performs his/ her duties and have all his/ her
rights.
 Respect: all individuals must be respected and must show respect for one another. Respect is
essential for trust and integrity in the work environment.
Also, Vuuren (2016) suggests a governance of ethics management framework (refer to
figure 2 below) that would be useful for organizations as follows:

Figure 2 Governance of Ethics Management Framework

The first element of the above framework is leadership commitment, which is concerned
mainly with managerial ethics.

2.10. Leadership Commitment/Managerial Ethics

Caldarelli et al. (2012) suggested that risk management strategy must take into consideration
ethical issues, which should be fostered by the top management. Managerial ethics are
concerned with situations managers’ face that involve taking decisions about an ethical issue,
matters of right and wrong. Management ethics is a part of the corporate social responsibility.
Business should not be only profitable but must contribute to the development of the area in

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 Risk Management and Business Ethics: Relations and Impacts in the GCC

which it operates (Jamnik, 2017). In fact, business has four specific social responsibilities: be
profitable, complies with laws, applies ethical practices and do philanthropic activities
(Carroll, 1979). Steinberg (2012) pointed out that ethics can only be maintained within a
business organization if the management monitors the employee’s activities and practices.
Ethical criteria must be formulated to evaluate employees’ performance and interactions with
each other’s. Managers are recommended to apply appropriate policies, procedures, and
systems that reward ethical conduct and punish unethical acts.
An ethical risk management strategy is deeply dependent on the integrity and ethical
principles of managers and shareholders. Ethical managers will be regarded by employees and
other stakeholders as reliable and people of integrity. They will inspire trust. This trust will
motivate employees to obey rules and avoid risks resultant from unethical practices (Norman,
2013). They should promote ethical attitude in the organization in order to gain the resultant
economic, social and environmental benefits.
In fact, there are many other reasons for managers to be ethical. For example, managers
face many more ethical issues than other employees. “an ethical issue is a problem, situation
or opportunity requiring an individual or organization to choose among several actions that
must be evaluated as right or wrong, ethical or unethical” (Jamnik, 2017, p.92). Managers
experience ethical issues at many levels including personal, organizational, trade/
professional, and global levels. They are often faced by a situation that involves decision
making as it is the core of the management process.
Interestingly, ethical business culture can be achieved only if there is an alignment
between formal structures and process on one hand and informal recognition of factors that
motivate employees to behave ethically such as heroes, stories, and rituals on ethics. Leaders
should focus on their own personal moral development to act as a role model for other
organizational members (Jondle, Maines, Burke, & Young, 2013). Thus, compliance with
ethics in an organization can be ensured only when managers adhere to ethical principles.

2.11. Risk management Governance Structures

Governance should be comprised of all managers at the top level. They must work on
ensuring compliance with business ethics in the organization. Top management such as the
board of directors. Chief executive officers and Chief finances officers must ensure that all
employees follow business ethical principles (Vuuren, 2016). However, formulating business
ethics risk management is the responsibility of risk management in an organization.

2.12. Ethics Risk Management

Ethics risk management includes planning, organizing, directing and controlling resources
and operations to make certain that ethical principles applied in the organization facilitate the
accomplishment of organizational objectives although events are uncertain (Vuuren, 2016).
Rossouw and Vuuren (2013) state that ethics risk management enable the organization to have
certain advantages. For example, stakeholders will have faith in the organization and thus will
be loyal. Also, Saremi and Nezhad (2014) suggest that business ethics risk management
encourage employees to adopt high teamwork morals, honesty, and frankness. They say that
bribe-taking could be prevented only through effective business ethics risk management, and
increases employees’ productivity. It is clear that proper ethics risk management provides
many benefits to an organization that leads to an increase in employees’ loyalty, productivity,
and overall profits.

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 Saad Darwish and Marwan Mohamed Abdeldayem

2.13. Ethics Risk Assessment

Generally, risk assessment focuses on the need to reduce the possibility of harm that is likely
to occur. Thus, identifying the consequences of risk is the base for risk assessment. The
ethical theory of consequentialism is, therefore, closely related to risk assessment. It utilizes
the outcomes of actions to identify their moral worth (Walter, 2014). This theory states that an
action is considered moral when its positive consequences are many more than its negative
consequences. All individuals affected by the action must be treated equally. In this sense,
ethics risk can be assessed on the concept that an action that gives little benefit to a few
people while harming many more people is unethical regardless of the people affected by the
action. Consequentialism can be found in many forms such as utilitarianism, which assesses
the consequences according to the resultant happiness and pleasure (Walter, 2014). Moreover,
the main aim of an ethics risk assessment is to determine the beliefs, practices, and behavior
that are contrasting with the compliance with ethical principles and standards or facilitates the
application of ethical principles and standards (Vuuren, 2016). Thus, the results of an action
are the sole determinant of its ethicality. Also, assessing ethics risk is an essential step in
ethics risk management in a business organization. Therefore, the main research question of
this study is “How business ethics and risk management are related to each other in the
GCC?”

3. METHODOLOGY
This section explains the methods used to collect and analyze data. Therefore, it includes the
questionnaire, statistical techniques used as well as procedures followed to achieve the
research purpose. This research effort was conducted by exploring the past studies, literature
review. Keywords were used for the search include risk, risk management, ethics, business
ethics, ethics management, and business ethical risks. Although many studies were found,
most of them focused only on one aspect whether risk management or business ethics. The
studies that handle both topics were scarce. Journal articles were selected based on certain
criteria: journals must be peer review and the articles must be published between 2012 and
2019. However, very few journal articles published before 2012 were used as it contains
unchangeable and useful information. Books published between 2012 and 2019 were also
used in the literature review.

3.1. Questionnaire
As mentioned earlier, the research instrument used in this study is a questionnaire survey.
This questionnaire contains 16 items that measure the business ethics and risk management.
Respondents were asked to give their answer for each item on a 5-point Likert scale from 1
(less important) to 5 (very important).

3.2. Data and Procedures

Data was collected from Arab people who are living in five different Gulf countries (Bahrain,
Saudi Arabia, Kuwait, Oman and UAE). Worth mentioning that we utilized an online survey
that directed to a sample of 1500 individuals from different Gulf countries. Out of this we
received a response from 970, which represent a very good response rate of 64.6%. This
response rate found to be satisfactory in the field of social sciences’ studies (Abdeldayem and
Aldulaimi, 2019).
A total of 960 respondents agreed to participate in this research effort. Participants ranged
in age from 21 to 60 and over with an average of 33.5 years (see table 1 and figure 3).
Composition of age groups were also controlled so as to occupy equal proportions: 20’s
(23.7%), 30’s (40.2%), 40’s (18.6 %), and 50’s (9.3%). Levels of education were generally

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 Risk Management and Business Ethics: Relations and Impacts in the GCC

high, as 65% of the participants of this study are having postgraduate studies. Since the
questionnaire was in English only highly educated people can understand it (refer to table 2)

Table 1 Analysis of Respondents Age

Frequency Percent Valid Percent Cumulative
Percent
21-30 230 23.7 23.7 23.7
31-40 390 40.2 40.2 63.9
41-50 180 18.6 18.6 82.5
Valid 51-60 90 9.3 9.3 91.8
60 and over 70 7.2 7.2 99.0
Age: 10 1.0 1.0 100.0
Total 970 100.0 100.0

Figure 3 Analysis of Respondents Age

Table 2 Analysis of Respondents level of Education
Frequency Percent Valid Percent Cumulative
Percent
10 1.0 1.0 1.0
Bachelor 320 33.0 33.0 34.0
Highest Degree Achieved 10 1.0 1.0 35.1
Valid Master 310 32.0 32.0 67.0
PhD 270 27.8 27.8 94.8
Post-grad Diploma 50 5.2 5.2 100.0
Total 970 100.0 100.0

4. RESEARCH FINDINGS AND RESULTS

The data collected for this study were entered to SPSS version 21 in order to conduct some
statistical analysis. We tested the reliability of the questionnaire using Cronbach Alpha. Table
(3) below shows an overall reliability of 0.792 and the reliability levels for the main
dimensions of business ethics and risk management are 0.911 and 0.832 respectively. All
levels of reliability are found to be satisfactory.

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 Saad Darwish and Marwan Mohamed Abdeldayem

Table 3 Cronbach Alpha of the variables

Dimensions Cronbach Alpha Items No
Business Ethics 0.911 11
Risk Management 0.832 5

Table 4 Descriptive statistics for Business Ethics and Risk Management

Mean Median SD Var. Min. Max
I maintain appropriate confidentiality 4.40 5.00 .827 .684 1 5
I say “no” to in-appropriate requests 4.09 4.00 1.07 1.16 1 5
I show respect for copyright laws 4.28 5.00 1.05 1.12 1 5
I am honest when sharing information with others 4.80 5.00 .718 .516 1 5
I balance organizational and personal needs 4.13 4.00 .828 .686 1 5
I am able to avoid conflicts of interest 4.16 4.00 .955 .912 1 5
I am able to manage my personal biases 4.23 4.00 .864 .747 2 5
I respect the diversity within my organization 4.44 4.00 .761 .810 1 5
I utilize my authority properly 4.49 5.00 .784 .614 1 5
I challenge myself to “do the right thing 4.44 5.00 .779 .607 1 5
I follow orders regardless if they appear un-ethical 4.66 5.00 .678 .460 1 5
Risks conflicting with my value system must be avoided 2.78 3.00 1.47 2.17 1 5
Controlling risks is an ethical commitment 4.05 4.00 1.00 1.01 1 5
Ethics help in developing people’s risk perception 4.10 4.00 .989 .979 1 5
Risk awareness supports ethical value system 4.20 4.00 .841 .708 1 5
Risk management is an ethical corporate responsibility 4.26 5.00 .976 .953 1 5
It can be seen from table (4) the mean, median, standard deviation, minimum and
maximum of the responses. The first 11 items in this table represent “Business Ethics”, while
the last 6 items are the components of “Risk Management”. Table (4) reveals that the
business ethics grand mean is 4.37 with a mean of 4.80 represents the highest value among
the 11 dimensions of business ethics for the statement that “I am honest when sharing
information with others” followed by the statement that “I follow orders regardless if they
appear un-ethical” with a mean value of 4.66. This result indicates that a great portion of Gulf
people are somehow committed to business ethics in managing risk in their business
organizations. This surprising result can be explained by the fact that participants were
exposed to the purpose of this study. Therefore, they tend to choose the optimal answers that
can put them in an excellent position in terms of high level of business ethics compliance in
managing risk in their business organizations. Consequently, business ethics must be
considered an essential aspect of risk management as an ethics risk is so serious that it may
lead to the destruction of the whole business.
On the other hand, the grand mean of risk management of 3.97 representing a lower value
compared to that of business ethics (4.37). This result reveals that Gulf people participated in
this research effort are not really oriented by risk management. This result found to be in line
with previous studies such as Abdeldayem and Darwish (2018), Anwar (2017) and Caldarelli,
et al (2012). For instance, the statement that “Risk management is an ethical corporate
responsibility” with a mean of 4.26 scored the highest among the 6 items of risk management.
However, the question of “Risks conflicting with my value system must be avoided” a mean
of 2.78 represents the lowest value in risk management. This result can be interpreted as
participants of this study seem to consider business ethics in managing risk as a responsibility
of their firms rather than an individual responsibility.
Finally, there are many business ethics risk management models that are useful for
organizations to follow; however, the model for managing ethics risks must be based on
predefined ethical principles that take into consideration the interests of all people involved.

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 Risk Management and Business Ethics: Relations and Impacts in the GCC

Further, ethics has a strong relationship with risk management in the sense that an effective
and efficient risk management cannot be achieved without ensuring ethics compliance by all
parties involved. All managers of an organization must maintain ethicality to ensure other
employees follow their steps. Business ethics risk management must be based on a solid
model that covers the steps of identifying, assessing and facing ethical risks. Notably, the
study indicates that compliance with business ethics risk management ensures the
sustainability and profitability of the business throughout the GCC region.

5. CONCLUDING COMMENTS
The main purpose of the study is to determine the nature of the relationship between risk
management and business ethics. Risk management is an essential part of the management of
an organization. It provides many benefits to the organization including sustainability and
profitability. Risk management is achieved through a certain step and methodologies that are
selected based on the type of the risk involved. One type of the risks that business
organizations are likely to face is the ethics risk. Risks associated with ethics revolve around
the consequences of unethical and immoral action at any level of the organization. Although
all employees must comply with the ethics of the business entity, the management bears the
major responsibility of maintaining ethics as they are always faced by decision making
concerning ethics. They often set an example for the rest of the staff to follow. The
relationship between risk management and business ethics is strong and clear. Ethics must be
considered by risk management officials to avoid any unethical actions that might not only
harm but also destroy the whole business. The modern business history is abundant with
examples of companies that incurred great losses in the form of reputation loss or financial
loss due to fines because of scandals and unethical actions. It seems that risk management
cannot be effective and efficient without taking into consideration business ethics risks. It can
be concluded that business ethics is not just a fancy term that corporations brag about in the
business world; compliance with business ethics is a real comparative edge to organizations
that follow an effective risk management.
Based on the findings of this study, the following recommendations are suggested for
business organizations. Through these recommendation businesses could achieve proper
business ethics risk management:
 Business management should learn from history that although unethical business practice may
result in quick profits, it causes great harm to the company when exposed such as reputation
loss and huge compensations for the harmed
 Business ethics must be considered an essential aspect of risk management as an ethics risk is
so serious that it may lead to the destruction of the whole business.
 There is many business ethics risk management model that is useful for organizations to
follow; however, the model for managing ethics risks must be based on predefined ethical
principles that take into consideration the interests of all people involved.
 Managers must be a role model for the rest of the employees in an organization, as such, trust
and loyalty become prevalent in the work environment.
 Ethical issues must be an approach based on predetermined ethical principles to avoid any bias
by any party.

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 Saad Darwish and Marwan Mohamed Abdeldayem

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