The role of ethics and values in shaping risk culture: a case study
In today's complex business landscape, organisations face numerous risks that can have significant consequences on their operations, reputation and stakeholders.
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Developing a strong risk culture is crucial to effectively manage these risks. However, risk culture is not solely shaped by policies and procedures; it is deeply influenced by the ethical values and principles that guide an organisation's behaviour.
This case study explores a real-life example of how ethics and values played a pivotal role in shaping risk culture within an organisation and the impact it had on its risk management practices.
Case Study:
ALTUM TC Limited - Embedding Ethics and Values into Risk Culture
Background:
The company operating in the pharmaceutical industry. With a focus on research and development, the company is committed to delivering innovative healthcare solutions to improve patients' lives.
However, in recent years, the organisation faced significant reputational and legal challenges due to a lack of a strong risk culture. In response, the company's leadership recognised the need to prioritise ethics and values as integral components of their risk management approach.
Step 1: Defining core ethical values
The first step taken by ALTUM TC's leadership was to define and articulate a set of core ethical values that would guide the organisation's risk management practices.
They engaged in a collaborative process involving key stakeholders, including employees, senior management and external experts to identify the fundamental principles that should govern their operations.
The identified ethical values included integrity, transparency, patient safety, environmental sustainability and compliance with legal and regulatory frameworks. These values formed the foundation for the organisation's risk culture with the aim of ensuring that ethical considerations were integrated into all decision-making processes and risk management activities.
Step 2: Communicating Ethical Expectations
Once the core ethical values were established, ALTUM TC's leadership focused on effectively communicating these expectations to all employees. They understood that simply stating the values would not be sufficient; they needed to be embedded into the organisation's culture.
To achieve this, the leadership developed a comprehensive communication strategy. They held meetings, conducted training sessions and launched an internal campaign to raise awareness and understanding of the ethical values and their role in shaping risk culture. The message was clear: every employee had a responsibility to uphold these values and integrate them into their daily work.
Step 3: Integration into Policies and Procedures
Ethics and values were not treated as abstract concepts within ALTUM TC; they were translated into concrete actions and integrated into the organisation's policies and procedures.
The leadership revised and updated the company's risk management framework to align with the core ethical values.
For instance, the risk assessment process was enhanced to explicitly consider ethical risks and their potential impact on patients, employees and the environment. Additionally, the company's code of conduct was revised to include specific guidelines on ethical decision-making, emphasizing the importance of integrity, transparency and compliance.
Step 4: Empowering Ethical Decision-Making
ALTUM TC’s leadership understood that creating a strong risk culture required empowering employees to make ethical decisions. They recognised that risk management was not solely the responsibility of a select few but a collective effort that involved every individual within the organisation.
To support ethical decision-making, the leadership implemented training programs that provided employees with the necessary knowledge and skills to navigate ethical dilemmas.
These programs encouraged open discussions, case studies, and role-playing exercises to enhance employees' ability to identify, assess, and manage ethical risks.
Step 5: Reinforcing and Recognising Ethical Behaviour
To ensure that ethics and values remained at the forefront of the organisation's risk culture, ALTUM TC's leadership established mechanisms to reinforce and recognize ethical behaviour. They created channels for employees to report ethical concerns anonymously and without fear of retaliation.
Furthermore, the leadership integrated ethical considerations into performance evaluations and recognised individuals and teams that demonstrated exemplary ethical behaviour in their day-to-day work.
This recognition fostered a culture where employees felt valued and encouraged to uphold the organisation's ethical values.
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Results and Impact:
The efforts to embed ethics and values into ALTUM TC's risk culture yielded significant results.
The organisation experienced a positive shift in its risk management practices, resulting in improved decision-making, enhanced compliance and increased stakeholder trust.
The integration of ethical considerations into risk assessments enabled the company to identify and mitigate potential risks that were previously overlooked. As a result, the organisation became more proactive in addressing emerging risks and reducing their potential impact on patients, the environment, and overall business operations.
Furthermore, the emphasis on ethics and values had a positive impact on employee engagement and morale.
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Employees felt a sense of purpose and pride in working for an organisation that prioritised ethics and integrity. This, in turn, fostered a culture of accountability and transparency where employees were more likely to report risks, share concerns and actively contribute to risk management efforts.
Conclusion
The case of ALTUM TC highlights the significant role that ethics and values play in shaping risk culture within an organisation. By defining core ethical values, communicating expectations, integrating ethics into policies and procedures, empowering ethical decision-making and reinforcing ethical behaviour, the organisation transformed its risk culture and achieved positive outcomes.
Organisations across industries can draw valuable lessons from this case study. Prioritising ethics and values in risk management is not only an ethical imperative but also a strategic advantage.
A strong risk culture that is rooted in ethical principles helps organisations build resilience, maintain stakeholder trust and navigate the complexities of the business landscape with integrity.
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The writer is an independent Internal Audit Advisor, Enterprise Risk Management Consultant and professional trainer. He is the founder and Chief Operating Officer of Redric Consulting (RC).
RC is focused on empowering internal audit, risk and control professionals through training and conferences to equip them with relevant skills, knowledge and attitudes that position them as value-adding professionals. You may reach out to Frederick on fpaikins@redricconsulting.com