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Why risk managers need to pay attention to the Modern Slavery Act

Nearly 50 per cent of UK firms that need to do so have failed to comply with the Modern Slavery Act. That was part of the message of Airmic CEO John Ludlow when he spoke at last month's FERMA annual seminar. His co-presenter Prof Alexandros Paraskevas urged risk managers to look beyond mere compliance at the wider regulatory and social imperatives of Corporate Social Responsibility.

It is estimated that there are more than 40 million slaves globally, more than a million of them in Europe. Companies operating in the UK with a global turnover in excess of £36 million have a legal duty to report how they combat it. Yet too few firms to date have paid much attention to the Modern Slavery Act 2015 (MSA), John Ludlow told the event.

The problem is by no means confined to the hospitality industry, but the figures are startling. The number of sex slaves working in and around hotels in Europe alone is put at 93,000 and the number of other slaves at 4,500. These are people forced to work without any profit for themselves.

Looking specifically at UK businesses, 46 % (2,352 cases) were victims of labour exploitation across various sectors, including agriculture, food processing, shellfish and food packaging, construction, driveway and block paving, car washes and nail bars. The risk of these victims working in a company's operation or in its supply chain is therefore very high.

Under Section 54 of the MSA, companies must publish an annual modern slavery statement that describes the measures and actions, if any, they have taken to address modern slavery within their operations and supply chains. These statements must also be signed by a director, approved by the board and displayed on the company's website.

Businesses must explain the actions they have taken to ensure compliance under six different headings, the most challenging of which is likely to be the supply chains. Companies have a responsibility to ensure that the workers employed by their suppliers - and by their suppliers' suppliers - are all suitably paid and treated.

According to one assessment, 43% of FTSE 100 corporate statements failed to meet the minimum standards of the MSA. Whilst most companies reported action on incorporating it in risk assessments, half provided no meaningful information on how the risk is addressed.

His co-presenter, Professor Alexandros Paraskevas, urged risk managers to look beyond the MSA, important as that is. He pointed out that legislators in other countries are going down a similar path. France, for example, has gone much further to cover all human rights risks plus health and safety and environmental risks. Firms must submit a risk map and describe what they are doing about these issues.

"I would urge risk managers to move beyond compliance," he said. "We work in a fast-changing environment and the pressure for corporate social responsibility will come not primarily from legislators but from NGOs and civil society."

Large companies, he said, need to consider the wider risk management and reputational benefits of conducting business in a responsible manner.

This session provided a starting point for a Travel and Leisure industry group that Airmic will be launching in 2019. If members are interested in this group, please contact Georgina.Wainwright@airmic.com

Alexandros Paraskevas is Professor of Strategic Risk Management at the University of west London.

Click here for more news about the FERMA seminar