COMPLIANCE, ETHICS AND RISK MANAGEMENT

COMPLIANCE, ETHICS AND RISK MANAGEMENT

A question was recently put in a discussion group, whether COMPLIANCE is distinct from ETHICS and how they interact in a corporate environment.

I think COMPLIANCE has to do with meeting fully to all standards, rules and regulations, whether external or internal to the ORGANIZATION. The term comes from Latin (COM=TOGETHER), and Ancient Greek (PLERE=TO FULLFILL).

ETHICS provides the background in terms of moral character (good, evil, just, etc.), nature, disposition, habit and custom of a person to obey willingly or face the moral and other consequences if he or she does not. The term comes from Ancient Greek (ETHOS=Moral Character).

The question ‘If the person complies should he/she be also ethical?’ is irrelevant.

The question ‘If the person is ethical should he/she also comply?’ is also irrelevant.

The major philosophical question for managing organizations, to be resolved, however, is this: How to handle the case and to minimize if not avoid all-together, the possibility that the person (staff member, manager, executive, etc.) might easily damage and potentially destroy the organization, its stakeholders, customers and employees, etc., when that specific corporate person (staff member, manager, executive, etc.) who is complying fully with all rules and regulations and is or is not ethical, but WITH COMPLETE DISREGARD for the RISKS involved, makes the right decision on a strategic or operational transaction, issue or activity.

In other words we should see both COMPLIANCE and ETHICS co-existing within the GOVERNANCE FRAMEWORK which should also include RISK ASSESSMENT and RISK MANAGEMENT. 

Also we should ensure that all these mechanisms resolve to a satisfactory and beneficial level, to society, economy, community, organization and individuals concerned, the classical principal-agent problem.