Doing the Right Thing: The Best Risk Prevention

by Nicole Stempak for Business Finance Magazine, June 16th, 2011.

Companies are looking to manage risk by promoting an ethical work culture. By switching from a controls-based to a values-based approach, ethical conduct can be ingrained into the way they do business—and that can have an impact on the bottom line.

According to an annual survey of ethics and compliance leaders, improving the relationship between core values and day-to-day operations ranked as their top program goal with 69 percent. Improving risk management, the top priority last year, fell to 11th place this year with 45 percent.

The “2010-2011 Ethics and Compliance Leadership Survey Report,” conducted by LRN, a company that helps businesses develop ethical cultures, surveyed 107 companies (the majority of which are headquartered in North America but have a global presence) with more than 7,500 employees and $1-billion-plus in revenues.

“I think it’s now the conversation in the C-suite,” says Friso Van der Oord, leader, ethics and compliance solutions at LRN who helped design the survey and analyze the findings. “Ethics in some way is the foundational risk mitigator. Ethics helps organizations to delineate those boundaries between right and wrong. It creates a self-cleansing culture where people are comfortable asking the hard questions, comfortable intervening, comfortable reflecting on the hard decisions that these businesses need to make.”

Ethics and compliance leaders reported the top corporate priority for this year is growth, 70 percent, and Van der Oord says an ethical culture is key to fueling that growth. “Risks will go down when ethics in organization are truly lived and truly embedded into the way business is conducted,” he says. “If you look at many organizations, the incentive system is still very geared toward outcomes. Certainly, we can create growth in the short term by displaying the wrong behaviors but, at the end of the day, that doesn’t lead to sustainable growth or the long-term success of our organization.”

Despite anticipated company growth, almost half of ethics and compliance leaders did not foresee a change in their program budgets for this year and 68 percent expected staff size to stay the same. As a result, ethics and compliance leaders will have to get innovative, Van der Oord says. Leaders will have to find ways to weave ethical behavior into existing practices such as hiring decisions, promotions decisions, sales meetings and target setting meetings. (continue reading… )

 

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