Ethical risk management is incredibly difficult, mostly because you cannot predict what an employee is thinking or control every one of their actions. However, finding ways to manage this risk is vital: one person’s choices can cost millions of dollars, close down a business forever, and do significant damage to customers.

While risk avoidance is impossible, here are a few things you can do to lessen the chance of being a part of the latest scandal.

5 Ways to Manage Ethical Risk

1. Promote your values and lead by example

Most organizations have a list of values with the words “honesty”, “integrity”, or “accountability”. It’s good to have these written down, but the words are meaningless if the policies aren't followed: you must do more than use them in the company description.

Make sure that leadership behaviour supports the organization’s values—workers will be more likely to follow them if they know they are expected to and they have someone to model their behaviour after. An unethical boss is not likely to inspire ethical employees.

2. Provide ethical training

Employees cannot always be blamed for an unethical action. Not everyone has the same sense of “right” and “wrong”, so they should be instructed at the beginning of employment what behaviours are unacceptable.

Some actions may be blatantly unethical, but those more subtle or specific to your organization should be explored so employees can recognize when they are in a risky situation. Employees must also be trained on how to avoid the unethical behaviour and what course of action they should take instead.

Another important part of training is ensuring that employees understand the consequences of their actions. It is easier to act in an unethical fashion if you don’t think of all the people it could impact. Instruct employees on how these behaviours can hurt not only themselves, but their coworkers, the business, or your customers.

3. Implement a system for reporting unethical behaviour 

If an employee knows or suspects that someone within their organization is behaving unethically, they must have a way to report it.

It’s important to keep in mind that many people would not be comfortable just going to their manager – perhaps it is a superior performing the action, previous reports have been ignored, or the employee fears that the wrong-doer will discover who reported them.

For these reasons, every organization should implement an anonymous reporting system. Ideally, an external third party should manage this system so employees will feel comfortable reporting specific incident details.

Ethical risk management is nearly impossible without this, as even regularly occurring incidents may not be reported.

4. Use your organization's structure to deter unethical activities

People typically behave in unacceptable ways when they feel they will not be discovered or held responsible. Under-managed teams, remote locations, or individuals whose work is never questioned are excellent places for unethical behaviours to develop.

Ensure that appropriate management and checking systems are in place to deter employees from believing an unethical action will go unnoticed. 

5. Respond

It is important to follow through on every spot check and report to quickly determine when unethical actions are occurring in your organization. When they are discovered, respond efficiently and fairly.

Have a predetermined and publicly known list of consequences, so that there will be no debate over whether an action should result in a reprimand, probation, or being let go.

Don’t publicly berate the employee; if details of the incident must be shared, keep it professional and use it as an example for the organization to learn from in the future.  

The biggest key through all of these mitigation measures is consistency: follow your values, teach your employees to behave appropriately and report someone who isn’t, and respond in a standard fashion to all unethical activities.

Doing so will make employees and customers view your organization as accountable, trustworthy, and honest, meaning they are more likely to abide by the rules that will maintain this image. Hopefully, these steps will turn the risk of ethical disasters from frightening to minor.

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