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Managing your risk by Michael Kelly

NCACC Risk Management Director Michael Kelly writes a regular column on risk management for CountyLines. With more than 41 years of risk management/ insurance experience, he holds the CPCU - Chartered Property & Casualty Underwriter, ARM-P - Associate in Risk Management for Public Entities, CRM - Certified Risk Manager, ARe - Associate in Reinsurance and CIC - Certified Insurance Counselor Professional Designations. He can be reached at michael.kelly@ncacc.org or (919) 719-1124.  For archives of this column click here.

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Aug 02

Risk management and ethics - Who cares?

Posted on August 2, 2012 at 10:25 AM by Chris Baucom

Business ethics is a buzz term that has been batted around more than once in various risk management trade publications, but what is it exactly? Stated simply, it can be defined as knowing what is right or wrong in the workplace, making the distinction, and then doing the right thing. It is the establishment of fundamental ground rules or principals for our work lives with some guiding parameters that allow flexibility to address a wide array of business situations. Through implementation, business ethics will instill in your employee workforce a sense of doing business responsibly.

So how do you do this exactly? The first step is to develop and establish a formal code of ethics or a code of conduct – it is broad in scope and generally agreed to up front. Policies and procedures are set up and designed to provide guidance in a wide array of situations. These procedures are devised to resolve ethical dilemmas, but they don’t always cover every circumstance.

If there is still a remaining doubt as to a best course, it is often a good idea to get a collective wisdom opinion, i.e. discuss it with others. Sometimes one person may be too close to the problem to be able to clearly know the best course of action. An open and frank discussion with others in your risk management department may help.

So specifically, what and where are the problems? They generally arise from two major areas. First are the lapses in ethical behavior caused by greed, such as kickbacks/bonuses received from an agent or insurance carrier in exchange for being given an account. Secondly are lapses due to honest ignorance – these are tougher to recognize but will appear most often as questions of a conflict of interest. Generic examples might include accepting large gifts or favors from vendors your county deals with. In reality, the course of action is made much easier once a code of ethics is established – so that if there is any degree of a conflict of interest, then that person should recuse themselves and not be the individual making the decision in question.

You might ask, why bother with having a code of ethics in the risk management department for local government? Full disclosure and integrity are vital components for establishing and keeping the public’s trust, which forms the basis for all successful business relationships.

So what are the benefits of an ethics program and having a formal code of ethics? They directly affect and promote the highest standard of business practice. Through their use it develops an awareness and sensitivity as well as integrates ethical guidelines into the decision-making process with established mechanisms for resolving ethical dilemmas.

Drilling down, specific risk management examples of issues that should be addressed in the risk management code of ethics might include the following.

• Endeavor to provide balanced and accurate reporting of all conditions including those that might reflect adversely on your own risk management department

• Do not present information in such a way as to influence a certain outcome or decision, and if possible present alternative options based on solid facts and reasoning.

• Avoid conflicts of interest or even the appearance of a conflict of interest

• Follow your own code of ethics as it pertains to entertainment and gifts from third-party service providers

• Avoid at all costs the intent and appearance of unethical or compromising practice in all relationships, actions and communications.

• Do not do business with any organizations in which the risk manager or any family member has any financial interest.

An ethics roadmap provides a strong positive public image for those who work in the public sector – regardless of whether or not you are an elected official. Honesty builds trust, which translates into successful relationships in both business and at the personal level. Many of your decisions are already made in advance, by simply having the code in place before specifics necessitate their use.

Tag(s): ethics