A recent post touched on the dearth of corporate objectives for ethics amongst some European insurers. Ethics objectives are worthwhile for all sorts of reasons, but the obvious question to come out of that post is: what exactly should a firm focus on for its ethics objectives? To find them, you need to look at two things: the ethical issues most relevant to your firm’s strategic goals, and the ethical risks that your firm is exposed to.
I’m going to look a little more closely at the latter of these two sources of ethical objectives, by setting out why assessing ethical risks should be seen as a ‘must do’ by firms in the insurance sector. Here are seven such reasons.
Leadership and Focus
An assessment of ethical risks will highlight those issues that your firm’s senior people should pay most attention to. That attention should be framed as a set of ethical business objectives. Those key issues should also influence the ‘tone from the top’ adopted by those senior people, from which middle managers throughout the business will take their cue.
Policies and Issues
Your ethics policy can be worded with a touch of aspiration in it, but if it doesn’t also reflect to some degree the risks your firm faces from particular ethical issues, it won’t be taken seriously by managers and employees. It’s a short step from not being taken seriously to being ignored. An ethical risk assessment will allow you to reorientate your ethics policy to reflect the issues that your firm needs to pay most attention to.
Integration and Compliance
It’s a natural step from having identified the key ethical risks your firms faces to integrating them into your compliance programme. This allows responsibilities to be allocated and controls put in place.
Budgets and Resources
The budget for what you want to achieve on ethics has to be justified in the business planning language of strategic goals, risks and opportunities. An assessment of ethical risks will confirm the significance of particular issues and help you justify a budget to manage them: for example through training for people whose work most often exposes them to such issues.
A forward looking perspective
Knowing your firm’s significant ethical risks helps you move from a hindsight view of the ethical challenges being faced, to a forward looking perspective that helps your firm prepare controls to contain the problem and reinforce the right attitudes around the issue.
Base lines and Progress
Your first assessment of ethical risks will tell you where you currently stand and will act as a base line from which future progress can be measured. This can be done from the perspective of the overall company or that of individual ethical issues.
Regulation and Reputation
And last but not least, undertaking an ethical risks assessment will tell the regulator that you’re going in the right direction on ethics, making their visits that little bit easier for both of you.
So how you might go about assessing the risks to your firm’s business from ethical issues? One approach is to consider ethical risks in three forms: sources from the industry itself, sources from how the firm is organised and run, and sources from how employees go about their work. This is explained in more detail in my guide “How to Assess Ethical Risks”. The guide is for subscribers to the blog, so you can download the guide and sign up to the blog by clicking on this link.