We have always done it, so why change now • This is how this business works • If I don’t do it, somebody else will • It works, so let’s not ask too many questions • Nobody will notice and nobody will be hurt Opaqueness because the behaviour is unethical there is a strong inclination to not disclose Routinely ask the following questions: • Are you doing what you promised to do? • Are you using your best knowledge and intention in doing it? • Are you doing what public authorities, superiors, colleagues and business partners expect you to do, and if not why? • Are you conforming to the mission and the values of your company, as they are publicly stated? • Will your actions enhance public confidence in your company and industry? • Would you behave similarly if your actions were publicly observed? Source: Ignazio Angeloni, Member of the Supervisory Board of the ECB, Venice, 26 Sep. 2014
20 Compliance risk is interrelated with business ethics and risk culture Risk Culture Compliance Ethics ▪ Ethics guides all decision making whether mandated by laws and policies or not. ▪ An ethically focused organisation will be more likely to comply with laws, policies and community expectations, and will support good risk culture reflected in stronger risk governance. ▪ Poor ethics will influence risk culture and undermine compliance.
21 The principles of ethical behaviour ▪ Ethics is concerned with the moral philosophy, values and norms of behaviour that guide a corporation’s behaviour within society ▪ There are seven principles of ethical business practices that should underpin all decisionmaking: 1. Dignity: respect the interest of others 2. Equitability: be just and fair in decisions 3. Prudence : apply judgment and make a situation no worse 4. Honesty : no cheating or lying 5. Openness: don’t conceal 6. Goodwill: be socially responsible 7. Avoidance of suffering : takes steps to avoid damage
22 Going beyond compliance ▪ The intent is to expand the role of compliance risk management to be a competitive advantage: – Application of ethical principles: there must be universal adherence to the organisation’s compliance policies and codes of ethics. Directors, senior managers, managers and all other levels of staff must be subjected to these provisions – Greater use of technology to speed development of products and lower compliance costs ▪ Organisations that embed compliance into their business behaviors, supported by strong positive ethical considerations: – receive higher levels of customer and employee commitment – enhanced brand recognition and value, and – better stakeholder returns and market capitalisation
23 Key questions when assessing compliance risk There are a number of critical questions organisations should ask related to compliance risks and the program(s) in place to mitigate those risks: 1. What kinds of compliance failures would create significant brand risk or reputational damage? Could the failures arise internally, in the supply chain, or with regard to third parties operating on the organization’s behalf? What
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