October 29, 2021 Last updated October 29th, 2021 4,549 Reads share

How Company Ethics Impact Risk Management Strategies

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Risk management is one of the top priorities for most companies operating today. Organizations across the globe invest heavily in risk management strategies — as much as $9.95 for every $1,000 they earn in revenue.

But despite their investments, many of these organizations fail to cultivate one thing that will make a tremendous impact in their risk management: an ethical corporate culture.

It should be no surprise that company ethics have a direct impact on risk management. After all, an “ethical” workforce is far less likely to find itself embroiled in lawsuits or non-compliance sanctions.

However, research shows that corporate culture has a more profound impact than you might have thought; companies with a strong culture focused on ethics and compliance are 38% less likely to observe FCPA violations, 76% less likely to observe FCA violations, and 65% less likely to engage in other forms of white-collar crime.

It is clear that a corporate culture focused on ethics in business and compliance is a benefit to your company’s risk management strategy. But how can you build that culture in your business? Let’s discuss how ethics and risk management can work hand in hand.

Ethics & Risk Management

First and foremost, it is important to understand that encouraging corporate ethics is a top-down operation. Senior leaders in a company need to talk the talk AND walk the walk if they want their employees to follow suit and priorities ethics and compliance.

This means that the top management in any organization needs to be aware of and involved in the minutiae of their company’s daily operations. If you’re too far removed from what’s happening among your employees, they will feel it — and it will send a message that you don’t care about the work they do. This attitude can be a breeding ground for misconduct. After all, if the boss doesn’t care, why should they?

Luckily, you can easily prevent misconduct in the workplace by making ethics a key company value. If you lead with conviction and encourage all your employees to do the same, you’ll see great success (and your risk management team will thank you).

Incorporating Ethics into Your Risk Management Strategies

If you want to optimize your risk management strategies, you need to start by placing ethics and compliance at the center of everything you do. But what does that look like in practice? Here are a few ways you can integrate ethics into your risk management strategies.

Make Ethics the Norm — Even in Times of Crisis

It’s easy to say that ethics is a cornerstone of your company and an important value when you aren’t dealing with a scandal. But as Dante Disparte of Harvard Business Review writes, “No one gets extra credit for doing the right thing when it is easy.”

Making ethics a part of your risk management strategy means adhering to your ethical standards no matter what is happening in your company. During difficult times, leaders need to lean into ethics and follow compliance standards more closely than ever — because it’s during those times that most workers are looking for guidance.

Explain the Impacts

Fostering a culture of ethics and compliance means spending a little extra cash. There are training programs to create, compliance hotlines to hire, and many other tools that can help promote ethics in the workforce.

These extra expenses might make business leaders balk. After all, we’ve already discussed the costs they’re already investing in risk management. However, risk management teams need to show managers how ethics is connected to risk management, and how an ethical culture can lead to fewer risk management (and damage control) costs down the line. Ultimately, ethics benefits the bottom line!

Set clear policies and procedures

Once your business has the green light to invest in ethics, you need to do so as clearly as possible. Ambiguity is an opportunity for bad actors to behave unethically!

Make sure your ethics efforts (training, ethics hotline, non-compliance policies, etc.) are easy to understand AND easy to look up. This will ensure that all your employees know what is expected of them — and where and how they can speak up if they witness any misconduct.

Practice Enterprise-level Ethics

We’ve already discussed the fact that ethics practices should take a top-down approach, but it bears repeating here. Many businesses struggle to maintain an ethical culture as they grow, simply because there are too many employees to adequately foster a cohesive corporate culture.

When this happens, it is more important than ever for the top-level executives and managers to exemplify the company’s ethical values. Modeling ethical business practices — and opening encouraging your colleagues and employees to do the same — will keep the culture alive and well no matter how large your business becomes.

And no matter how large or small your business may be, it’s always important to invest in quality compliance tools to help your ethical corporate culture grow. Visit ComplianceLine today to see how our programs can help your company.


Giovanni Gallo

Giovanni Gallo

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