CSR Guidelines for the Financial Sector - page 7

Third, CSR has not been given asmuch prominence onWall Street as it should simply because of the framework
under which corporations operate. Corporations are expected tomerelymakemoney for the shareholders. However,
CSR expenditures are as critical as expenditures on research and development, marketing and other so perceived
corporate expenses. CSR expenditures should not be perceived as amisdirection of shareholders funds but a
preservation and key investment in every portfolio.
Fourth, CSR has a positive impact on the intangible assets of a company. A company’s clear ideas on its identity and
long-term goal can help it identify two sets of variables; a ‘value creating path’ and a set of key success factors (KSF)
and indicators that are appropriate as performancemeasurements. Such a process is very similar to developingCSR
in a company that, in turn, will have a powerful effect on developing intellectual capital, a significant part of a
company’s intangible assets.
Fifth, CSR has a long-term affect on improving a company’s bottom line. There is a positive link between social and
financial performance especially when looking at the increased relevance of intangible assets such as reputation and
knowledge networks. These turn into a source of market value and competitive advantage.
Sixth, social responsibility is not confined to corporations. Institutions that have amajor impact on theway we live are
also expected to behave in a socially responsiblemanner.
All set aside, the bottom line of CSR is that it helps in improving financial performance. Financial institutions that
demonstrate that they are engaging in practices that satisfy and go beyond regulatory compliance requirements are
being given less scrutiny and free reign by both national and local government entities. It is clear that institutions
addressing ethical, social, and environmental responsibilities have rapidly grown access to capital that might not
otherwise have been available.
Also, given the importance of banks, theCSR of banks themselves assumes a central role. If bankmanagers are
confrontedwith soundCSR policies, strategies and practices, they will bemore likely to allocate capital efficiently and
encourage effectiveCSR over the firms they fund. In contrast, if banksmanagers act in their own interests rather than
the interests of shareholders and stakeholders, then banks will correspondingly be less likely to allocate the savings
of society efficiently.
Looking ahead, we believe that amajor challenge for the financial sector is tomonitor and benchmark practices.
Without such benchmarking andmonitoring, the ability to ensure actual value versus perceived valuewould be
extremely difficult.
Accordingly creatingCSRGuidelines for the banking and financial sector in theMENA regionwill:
• Improve the valuation of the institutions, by improving long term financial performance;
•Develops sustainability and sustainable practices;
• Improves stakeholder relations;
• Improves reputation and branding for the institution; and
• Involve institutions in the economic and social development of the environments they exist in.
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