I once found myself in such a situation, when I was managing the design of a rather unique ‘alternative risk transfer’ product. The insurance side was highly complex, as were other financial aspects. There were few people in the London market capable of handling the issues involved, and as it so happened, the best people were a team led by a friend of mine from university times.
It was clearly in my firm’s interests to use this team – it already did a lot of work with the wider company within which the team sat. Yet both firms’ conflict of interest (CoI) policies would normally have barred the two sides working on this particular project. Instead, an arrangement was agreed by the two firms that contained the conflict risk and allowed the team’s expertise to be utilised.
This form of waiver process for the otherwise ‘written in stone’ policy stipulation worked because it followed a number of rules. The arrangements were agreed at a level more senior to me and with a great deal of transparency. I was backed out of the appointment decision and my friend was backed out of the implementation. A legal team then monitored the arrangements and reported to my firm’s board. In that way, the best interests of my firm, and the customers this project was to benefit, were put first.
The Key Components
What we had then were the key components for waiving a conflict of interest: decisions made by senior people outside of the immediate conflict, transparency of the process, active and ongoing oversight of the arrangements and a clear focus on the best interests of the firm.
In the end, the arrangements worked. The ART product went live and delivered the anticipated results. Might this also have happened if another team had been involved? It’s possible, but it would certainly have taken a lot longer, perhaps never completed at all.
Remember: conflicts of interest are situations, not accusations. They need to be actively managed in ways that suit the situation in which they’ve arisen. If your CoI policy sets standards that are too weak, then that ‘actively managed’ aspect is at risk and best interests not given due weight. If it sets standards that are too strong, then too many real world situations become missed opportunities.
Every conflict of interest policy needs a waiver arrangement supported by clear standards for its use.
