Businesses, politics, legality, and ethics are interconnected phenomena. The existing political, legal, and ethical issues impact companies’ business operations and financial activity differently. Although these phenomena are integral to the whole world’s functional system, they have imperfections and problems. Businesses may suffer from insufficient regulation, underdeveloped laws, or unacceptable corporate behavior. The significant negative impact of these issues on companies is caused by corruption, government spending, political instability, different types of penalties, irregularity in the investment process, discrimination, and others.
Political issues are one of the significant issues that impact the company’s financial and business operations. When political decisions directly impact a country’s economy, this adversely affects a company’s business and financial performance. For example, such factors as taxes or government spending may create an additional financial loss for a company (Carroll & Brown, 2023). Another issue is political instability, which creates multiple problems for business operations. Government instability may lead to disorders inside society, which, as a result, causes disruption of business operations and financial losses for the company. Corruption is present in many governments, negatively impacting a company’s expansion plans (Carroll & Brown, 2023). Political issues leading to a country’s financial crisis affect business, eliminating international companies from the domestic market. Conclusively, every country’s government must be interested in a good political situation because it creates consequences for businesses, impacting the whole country’s economy.
A similar effect is done by legal issues, where a company’s management has to protect assets. For example, regulatory legal risk affects a company’s economic value because a business becomes subject to stringent regulations (Carroll & Brown, 2023). All the regulatory specifications, laws, and policies must be analyzed to avoid negative consequences, such as penalties. It is crucial for management to support their company, distinguishing risks and finding solutions that will lead to positive consequences. A company’s business and financial operations also suffer from ethical issues. The most common ones that impact the financial side of a company are stakeholder interest and stockholder interest collisions, investment process irregularity, and others (Carroll & Brown, 2023). Companies usually try to be ethical, which leads to higher expenditures because being ethical means buying more quality supplies. Another ethical issue is a company’s inner discrimination, which harms a reputation of an organization’s reputation and financial stability. Nondisclosure disrupts a significant issue and leads to private information distribution. Management and employees must comply with specific guidelines and policies to avoid ethical problems in the company.
All of the mentioned issues that impact the company’s financial and operational sides negatively affect Corporate Social Responsibility. As a result of inappropriate problem-solving, strategies behind CSR lose their effectiveness. The lack of regulations that enforce CSR causes unsustainable business practices and irresponsibility regarding human rights (Carroll & Brown, 2023). To battle the effect of the issues made on CRS, a company must consider the needs of a work team and foster efficient initiatives. Human Resource (HR) departments impacted by the mentioned issues bear negative consequences. Legal problems lead to disruptions in HR regulations connected with workplace safety, hiring, and payment (Stone et al., 2021). At the same time, political issues, employment, and tax law change lead to long department complying processes. Eventually, ethics problems impact HR because of weak organizational decision-making and department collaboration malfunctioning. All company issues that come from legal, political, and ethical aspects negatively impact HR departments, which consequently disrupts the whole working process of a company.
Conclusively, different businesses’ operations and financial activities are influenced negatively by political instability, which results in companies’ weak functioning and financial losses. Another critical factor that comes from political instability and leads to business problems is social dissatisfaction. Legal issues such as severe regulations cause a challenging compliance process and eventually the application of penalties to companies. Ethical problems also impact businesses through weak corporate culture and inappropriate behavior. These issues affect CSR and HR departments, where the main problems are business unsustainability, irresponsible adoption of human rights, unsafe workplaces, and low-quality employment.
References
Carroll, A.B. & Brown, J. (2023). Business & society: Ethics, sustainability & stakeholder management, 11th ed. Cengage.
Stone, R.J., Cox, A., & Gavin, M. (2021). Human Resource management, 10th ed. John Wiley & Sons Australia.