You are an experienced business banker and been approached by an established small-to-medium business looking to move their business banking.
Following a local natural disaster, this business set itself up as a for-profit “social enterprise” that sold bracelets and distributed some of its profits into various charities and NGO’s to assist in the rebuild effort.
The business has been established for two years, and upon examination of their financials, you quickly learn that their business model is very profitable, fast growing, and meets all of your bank’s official lending and risk criteria.
You also discover the company’s business model relies on purchasing bracelets at a very low price from an overseas, third-party supplier; marketing the bracelets for sale online at a significant mark-up; and then shipping the bracelets from the overseas supplier directly to the customer.
Despite the very high profit margins, the business is only donating around two per cent of their profit into local charities and NGO’s.
If won over, this client would be a big boost to your portfolio, and every indication from your due diligence process shows that the business is not doing anything illegal, and sits well within your bank’s appetite for credit risk. However, you can’t help but feel that the business is to some degree exploiting a local natural disaster and taking advantage of an overseas supplier for their own financial gain.
What would you do?
- Should your personal discomfort with this issue impact your decision to take on the new business?
- What ethical considerations would you give to your decision-making?
We encourage you to post your answers in the comments so we can create a healthy discussion, with the aim of learning from our peers, becoming aware of differing perspectives and challenging our own biases.
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