"RISK MANAGEMENT AND DISTRIBUTIVE JUSTICE"
October 2007: Professor Robert Kolb presents paper in Korea and Belgium
Robert Kolb, Ph.D., Professor of Finance and Frank W. Considine Chair of Applied Ethics authored a paper discussing many aspects of distributive justice in managing risk.
SYNOPSIS
Risk management has effects far beyond those contemplated by risk managers. In managing risk, the manager attempts to dispose of unwanted risks by risk avoidance, risk mitigation, or risk transference. Sometimes risk is transferred to willing bearers of risk, for example, through the use of financial markets in which some parties undertake the bearing of risk in the hope of profits. In other instances, however, risks that are managed away may be transferred to third parties or the risk may be transferred to unwilling bearers of risk.. For example, risk management can transfer risk to employees without consulting them or can transfer risk to the public without actual public acceptance of the risk. As a consequence, risk management activities raise questions of distributive justice--the justice of how the goods and ills of a society are distributed across the members of society.
TOPICS
This paper considers the questions of distributive justice that arise from managing risk under a variety of market settings, ranging from perfect financial markets to situations in which markets exhibit serious imperfections or fail altogether. The analysis shows that risk management in perfect markets raises few questions of distributive justice. But as markets depart from perfection, questions of distributive justice become ever more important.
ARTICLE