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The ethics of procurement… What would you do?

Wednesday 23 September, 2020
by Anonymous

You are an experienced business banker and been approached by an established small-to-medium business looking to move their business banking.

Following a local natural disaster, this business set itself up as a for-profit “social enterprise” that sold bracelets and distributed some of its profits into various charities and NGO’s to assist in the rebuild effort.

The business has been established for two years, and upon examination of their financials, you quickly learn that their business model is very profitable, fast growing, and meets all of your bank’s official lending and risk criteria. 

You also discover the company’s business model relies on purchasing bracelets at a very low price from an overseas, third-party supplier; marketing the bracelets for sale online at a significant mark-up; and then shipping the bracelets from the overseas supplier directly to the customer.

Despite the very high profit margins, the business is only donating around two per cent of their profit into local charities and NGO’s. 

If won over, this client would be a big boost to your portfolio, and every indication from your due diligence process shows that the business is not doing anything illegal, and sits well within your bank’s appetite for credit risk. However, you can’t help but feel that the business is to some degree exploiting a local natural disaster and taking advantage of an overseas supplier for their own financial gain.

What would you do?

  • Should your personal discomfort with this issue impact your decision to take on the new business? 
  • What ethical considerations would you give to your decision-making?

We encourage you to post your answers in the comments so we can create a healthy discussion, with the aim of learning from our peers, becoming aware of differing perspectives and challenging our own biases.

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Photo by Elevate on Unsplash


There are 2 comments for The ethics of procurement… What would you do?.

Re: The ethics of procurement… What would you do?

Thursday 24 September, 2020
by Ian Shaw
An interesting dilemma. Should a banker become involved in the business strategy of his client? I say No. The the ethics involved in the mechanisms of the business making a profit and their chosen suppliers should be for the business owners to consider.As long as the ethical policies of the bank are not compromised in taking the client on. There may be an opportunity to discuss ethical sourcing and dissemination of profits in the client relationship.

Re: The ethics of procurement… What would you do?

Friday 25 September, 2020
by Jannis
I would be concerned about the supplier likely to favour exploitation of children or other disadvantaged groups through work. Proper customer and third-party supplier due diligence would be the first step prior to on-boarding.

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