Why every company needs a robust Conflict of Interest System

By IntelligenceBank GRC

“But I didn’t do anything,” are usually the first words to come out of a politician or executive’s mouth when they have been dismissed due to a conflict of interest.

intelligencebank artEssentially, most people think they aren’t doing anything wrong by accepting a gift from a business associate, using a relative’s warehouse to store excess product, or telling a friend to buy stock in a company they chair.

That’s because most people ithink they are inherently ‘good’ and therefore, if presented with a potentially compromising situation that could affect decision making, they don’t think they would make the wrong decision for the business.

The dilemma Chief Risk Officers face 

That’s the dilemma Chief Risk Officers face every day when trying to manage conflicts of interest with their directors, staff and even suppliers.

Most people simply do not understand that a conflict doesn’t need to be fulfilled to be problematic. Potential conflict is conflict.

Conflicts of interest can come in varying types and weight. Financial conflict and shareholding immediately spring to mind; however, hospitality and receiving or giving gifts  – what many consider normal business activity – is common. No matter what the amount, they all can skew the potential for unbiased, independent decision-making.

Automate your conflicts process; don’t rely on spreadsheets

The majority of risk managers will say they have strong policies and internal controls to deal with conflicts of interest.

This includes time (and money) spent on external audits to ensure these processes are adhered to.

In reality, most people do not thoroughly understand conflict policies and must be continually reminded about conflicts of interest policy, not just told once.

Your staff, including board members, must be educated on a range of conflicts your business commonly faces.  They must be told the systems (not just a spreadsheet) for declaring conflict approvals, as well as how to manage escalations.

If this process is not in place, ‘good people’  make poor decisions.

How To Embed Conflict Management Into a Culture

Recently, IntelligenceBank GRC was implemented by a top consumer goods company.

The GRC platform’s conflict of interest declaration software was used by the company to tackle a perceived culture problem with workers in the organization. Declarations have become part of each employees’ daily activities (starting from induction).

The company took the following steps:

  • It developed four key aspects to the COI Platform: approval workflow to escalate matters, FAQs and policies, a declarations system and training videos. Now, when board members and employees make a declaration, they understand why they have to do it and how it impacts the organization. In regards to changes in the regulatory framework, having the documentation in front of all staff ensures everyone was up to date.
  • Ensured that COI training was a feature of all staff inductions – from entry level employee to new board member. The onboarding process started with Conflict of Interest training.
  • Ensured all gifts – event, family and hospitality related were declared. No exceptions. Smart rules regarding declarations under $500 were logged in the system, but not elevated to superiors. Values in excess of $500 had to be approved by a person’s superior.
  • Seamless integration of The COI register with the company’s intranet and HR database was essential. Every day the register was seen by company employees at all levels. Any employee form submitted was automated to go straight to their supervisor.
  • The executive leadership team could review custom reports to review declarations by division, amount and type on a regular basis. For the program, benchmarks were developed to ensure goals were achieved.

For further information on best practices regarding Conflict of Interest programs and platforms, visit IntelligenceBank GRC or sign up for a COI demo on demo.intelligencebank.com/coi.

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