UCSI University
Issues Management:
Managing the “Responsibilities”
of the Business
Issues Management: Managing the “Responsibilities” of
the Business
This second level of management is based on an “outside-in”
investigation of major trends in the immediate and wider business
environment, which may affect the business in the medium to long
term.
These trends produce issues that exacerbate risks in the business
model and the business strategy or create new risks, thereby affecting
the sustainability of the business.
Issues are related to the less formal, more implicit, or even frontier expectations
within social contracts that are vague when latent but can become more concrete
as they mature.
Issues management is, therefore, more fluid, much less predictable, and more a
matter of connectedness and feeling for context, judgment, and opportunity
assessment than straightforward analysis, standard setting, and compliance
management.
These issues often serve as social symbols, channeling critique of business and
its perceived lack of responsibility or a lack of regulatory intervention by public
authorities in the face of global business dominance.
Backlash over social issues may appear disproportionate and helpless executives
can be left bewildered by accusations of a lack of corporate responsibility.
Issues may be mature, like
● corruption, inequality, poverty, privacy, obesity, off-shoring, access to
medicines, resource depletion, forest destruction, climate change.
Issues may be emerging like
● tax avoidance and tax competition, fugitives and migration, emissions
testing and performance of cars, programmed obsolescence of electrical
and electronic products.
Issues might be linked to industry structures or even global trade conditions. (
Adopting appropriate organizational responses to major trends in the business
environment and to the latent, emerging, and maturing issues of “corporate
responsibility” and developing the organizational capability for timely
responsiveness is key.
As a consequence, issues management should be on the agenda of top
management and boards.
Current Issues Management
● Major current issues such as a culture of systematic corruption,
inequality, poverty, privacy, obesity, offshoring, access to medicines,
resource depletion, forest destruction and climate change were not
long ago widely considered to be part of the responsibilities of
governments and regulators and not the responsibility of business.
● As these issues over time emerged, matured and became publicly
associated with corporate responsibility, they have shifted an
industry’s ground rules and pose serious threats to the
sustainability of the business.
● These trends produce issues that exacerbate risks in the business
model and strategy or create new risks, thereby affecting the
sustainability of the business model and strategy.
Issues Management
● Ethical issues, such as corruption, are particular challenges. Corruption is a mature issue.
The past 15 years provide ample evidence of the risks of engaging in corrupt practices. A
list of the top 10 settlements reveals names such as: Siemens ($1.6 billion),
KBR/Halliburton ($579 million), BAE Systems ($448 million), Daimler Benz ($195 million),
Alcatel Lucent ($137 million), and even Johnson & Johnson ($70 million) With the anti-
corruption stance of the Chinese government since 2013, companies take on significant
risk in the Chinese market by not following strict anti-corruption policies.
● The emerging and maturing issues of today are, without a doubt, climate change and
environmental footprints in general, along with related issues such as erosion of water
reserves, emissions testing and the performance of automobiles. But other issues are
also seemingly maturing, like inequality in general, access to medicines, corporate tax
avoidance and tax competition between countries from which companies benefit,
fugitives and migration and programmed obsolescence of electrical and electronic
products. Executives might be tempted to be dismissive of corporate responsibility in
these or only accept a small part of responsibility, but the bets are out on how long this
defensive attitude can last and when it results in a “too little, too late” blame in the
medium term or even short term.
Opportunity with Issues Management
● These issues can create new market opportunities that nimble
companies can identify and exploit for comparative advantage.
● Of course, there are first-mover business risks involved in
incorporating emerging issues very early on in business models and
strategies ahead of the competition, such as cost disadvantages.
● Thus, companies with a business model based on cost leadership and
standardization will be less keen. However, agile companies will
simultaneously consider the risks associated with lagging behind and
becoming an icon of corporate irresponsibility and greed. Industry
leaders are especially prone to becoming these icons
Consequences of Issues Management
● Issues management deals with the continuously shifting grounds of what is
perceived as business responsibilities by public opinion at large and specific
stakeholders in particular.
● Issues management deals with the informal, implicit, and frontier expectations of the
social contract.
● If issues are latent, like obesity or water depletion 15 years ago, a defensive attitude
(“business cannot solve these problems, governments should”) may not be
damaging, but alertness to the shifting grounds of perception may be necessary
nevertheless. As issues emerge, positions must be taken deliberately, and managerial
action is often required.
● (CSR departments are often tasked with compliance management, but this may not
be sufficient.)
Consequences of Issues Management
● Issues might be linked to industry structures or even global trade conditions and
again require much more exhaustive analysis and deliberate strategic action than
compliance management by CSR departments. They require immediate and strong
involvement of senior management and the board.
Examples of Issues Management
● In Nike’s case, a global trade agreement within the WTO provided for a supply quota per country in
the global apparel industry. This well-intended policy (equal access to world markets) had, however,
unintended side effects which indirectly allowed child labour to persist. Companies like Nike had
thousands of suppliers from many countries and found it impossible to control standards in the
supply chain and concentrate on quality relations with fewer suppliers.
● Cooperation between the industry sector and the WTO was required to adapt trade agreements
and avoid unintended consequences. Nike assumed industry leadership to help significantly in
making this happen.
Examples of Issues Management
● In Nike’s case, a global trade agreement within the WTO provided for a supply quota per country in
the global apparel industry. This well-intended policy (equal access to world markets) had, however,
unintended side effects which indirectly allowed child labour to persist. Companies like Nike had
thousands of suppliers from many countries and found it impossible to control standards in the
supply chain and concentrate on quality relations with fewer suppliers.
● Cooperation between the industry sector and the WTO was required to adapt trade agreements
and avoid unintended consequences. Nike assumed industry leadership to help significantly in
making this happen.
Key Questions to Ask for Issues Management
What are the current major trends in the business environment?
Which major issues – latent, emerging or maturing – affect the business model and exacerbate the
business model risks?
How is the company managing these issues: is it defensive, compliance, managerial, or strategic in
approach?
How will the business model be affected in the long term by major macro
trends like climate change, resource depletion, demographic change, geo-
political change, and the way these interact and reinforce each other?
How should the company protect and enhance value in the face of these
issues and trends?
How is organizational capability and leadership developed to respond in a
timely and appropriate way?