Personal dishonesty, a lack of integrity - if you see them you know how to react. Anti-competitive practices, supply chain fraud, health and safety and compliance violations are all much harder to spot. Get them wrong, however, and the impact on your business, your people and reputation can be disastrous. And if you are working in markets across the world, with diverse cultures and different ways of working, the challenges are even greater.
Types of ethical risk
Ethical risk generally falls into two areas:
Corporate risk - this includes financial losses from your supply chain, asset theft and other fraud; regulatory violations and allegations of bribery and corruption as well as issues relating to corporate responsibility such as breaching environmental safeguards.
Personal risk - when it comes to ethical issues senior officers are at personal risk of prosecution or sanctions including financial fines, disbarment from holding office and prison sentences.
Getting it right
The first step is to understand the risks you face. What risks are inherent in your industry or your business model? What issues arise from your legal and regulatory needs or from the territories in which you operate? You will need to review each of your key risks (from fraud and corruption to IT security and corporate espionage) and ensure you have a programme to address each one.
If you have processes and controls in place are they adequate? Who is responsible and accountable when problems arise? Whistle blowing policies, incident response arrangements and business partner assessments should be subject to regular review. And so should training: is your ethical message clear and understood across your business and its partners or agents?
If it is, you will still need to demonstrate it for regulators. Do you have an appropriate 'fire-drill' for handling a regulatory crisis? When the new Bribery Act becomes law will you be compliant or caught-out?
Addressing these issues proactively brings obvious benefits, from cutting the costs of supply chain fraud to keeping the regulators happy. You'll also have the comfort of knowing that you and your brand are well protected.