Business activity can be analyzed through a ‘risk awareness’ perspective and a ‘responsibility awareness’ perspective. However, risk and responsibility are actually interdependent. Risk-taking triggers responsibility issues and taking responsibility means risking being asked critical questions. This article suggests some first steps for combining these two perspectives conceptually. After several introductory illustrations showing how risk and responsibility issues are intertwined, the article looks separately each at risk and at responsibility. Then the argument that such perspectives could be usefully combined is elaborated (...) further from a theoretical angle and from a practical angle, by looking at various ethical issues and by presenting paradigmatic examples of balancing or sharing risk and responsibility related to leadership, to ERM and to insurance. (shrink)

This paper is intended to fill the gap in the literature on moral hazard amongst companies. It seeks to explore the moral hazard for companies by linking the leverage range with the risk involuntarily assumed by third parties. The paper takes the distinctive approach of trying to understand the nature of the moral hazard affected not only through asymmetries but also through lack of resources in companies. The paper also seeks to establish the importance of companies' moral hazard from an (...) ethical perspective and proposes an index –the moral hazard index– which provides the option of reducing risk when managers make decisions on leverage and equity levels; subsequently the assumed risk is controlled. An extreme case is set out of companies that have such high leverage that they survive with negative equity. In such cases the assumption of risk by third parties is undeniable. The paper explains the problem and shows the concern regarding company leverage. Although the index is still only theoretical, it offers opportunities for improvement to determine its applications and utility. Moral decisions are expected to be taken with regard to the structure of the capital of companies in order to reduce the risk assumed by third parties. (shrink)