In a recent report, Fidelity International identifies workplace misconduct as a financial risk with systemic implications. The report coins the term 'culture-based financial risks' to define how culture can pose risks for investors and impact shareholder value.
Therein, Fidelity proposes a framework to understand how harmful behaviors can create three levels of risk for investors: operational, societal gap, and systems-level. "[C]ompany-level incidences (operational) can lead to negative perceptions of a sector (societal gap), which in turn impact the sector's social license to operate (systems-level)," the report reads. “They can then lead to long-term and material impacts on economic productivity. The interconnected and additive nature of these risks can then form a vicious cycle for communities and economies.”
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