Asked to identify the ethical risks most associated with insurance, you’re likely to come up with mis-selling first. That however is the outcome from an ethical risk – you still need to drill down to the ethical issues that gave rise to the mis-selling in the first place.
Asked this time for the ethical risks most associated with your firm, mis-selling is not likely to come top of the list. It’s an emotive term that best describes what other firms can sometimes get up to.
It’s common when first thinking about ethical risks to veer towards headline outcomes and veer away from sensitive issues closer to home. Both tendencies need to be countered if your firm is to get a clear picture of the ethical issues that could have an impact on its business. Senior management are used to seeing neat presentations on enterprise risk management or corporate governance, so to be taken seriously, your assessment of ethical risk needs to be undertaken in a similarly structured way.
Enterprise risk management and corporate governance may appear at times to encompass ethical issues, but the results are often undermined by inadequate scope and depth. Part of what makes an assessment of ethical risks different is the extent to which one needs to think about them from both outside and inside the firm, and on the influence of cultures within the firm on how people behave.
It helps to divide that blank sheet of paper headed ‘ethical risks’ into three sections: market driven risks, firm driven risks and employee driven risks. These three dimensions reflect some of the hard realities about ethical risks: for example, that it’s not just about what individuals within the firm get up to, and that the firm could well have a share in the woes afflicting the wider market.
The best way in which to use these market, firm and employee dimensions of ethical risk is for getting to some of the more systemic drivers of ethical risk. Once you’ve got them in your sights, you’re able to adjust processes to deal with the cause of problems, not the effect. Therein lies real progress.