This article is an excerpt from GTDT Risk & Compliance Management 2022. Click here for the full guide.
Black Swan II events – when governments ignore the rule of law
Last year I wrote about covid-19 and recommended that all organizations have black swan events on their risk radar screens. As I write this (in one go on February 25, 2022, shortly after Russia’s attack on Ukraine), I want to share my perspective on another type of black swan event: situations where governments and especially the real decision makers – presidents, prime ministers and ministers – do not respect the rule of law and make their own laws. Such situations are black swan events because those who represent countries are expected to act in accordance with international law and regional and national legislation. How can states, governments and political leaders require their citizens to obey the law, if they themselves do not obey the law? It is an impossible and untenable situation and usually ends in tyranny, chaos and destruction, or all together.
In the context of our rapidly changing global climate and the existential risk to the survival of future generations, we all know what humanity should be focusing on, and many forward-looking people from all walks of life are devoting time and the energy to design the framework world for all of us to master the existential threat of climate change to humanity. ESG has become the term that covers all these initiatives: from the Paris Protocol at COP21, from the Business Roundtable declaration on shareholder engagement to the promotion of the raison d’être of the World Economic Forum, from the new ISO’s flagship standard on good governance of organizations (ISO 37000) to the work done by accounting standard setters, financial market watchdogs and regulators to build a framework for identifying, measuring and report on climate risk and other non-financial aspects of organizational performance. All this, to save our world.
What really does not help humanity and the survival of future generations are governments and political leaders who do not respect the rule of law and make laws according to their will. Such acts, whether big or small, have an enormous cost, above all human lives, and have an impact on the survival of humanity. Failing to follow established laws and norms, universal principles of human rights and disregarding the UN’s social development goals is unacceptable under any circumstances. Humanity will only survive if we all work together as reasonable and benevolent beings, as we were all born.
Coming back to risk management: all organizations, that is to say in particular all their leaders, must act in an ethical manner, in compliance with all applicable laws, and respect the principles of fairness, adequacy and transparency. It is international law and the international norm. This is what we should all demand of all states, their leaders and all corporate leaders. Yet we must think of the unthinkable and take into account the blatant disrespect for international law and rules, even on the part of governments and their political leaders. Risk treatment should focus on what can be done to avoid or mitigate the risk of black swan political events. On this point, I believe, as a proponent of best practices in compliance management systems, that faults, whether willful or blind, must be sanctioned. No legal framework can function if its violation remains unsanctioned. Tools for organizations to address the risk of black swan political events are investor-state dispute proceedings, criminal complaints to international tribunals, civil lawsuits combined with asset freezes and recovery actions, etc
In summary, black swan events are often also political events that are man-made and – in principle – preventable by those in power. As with all compliance violations, they must be sanctioned (this is simply international best practice). And we should all focus on what really matters today: climate, environment and social development to ensure that future generations have a planet to live on.
I wish you all peace in an ethical, fair, transparent and meaningful world.
I hope you enjoy the 2022 edition of Risk and Compliance Management.
Daniel Lucien Bühr, editor-in-chief