What is a conflict of interest?
In a busines context, it is the conflict between profit and ethical sales practice or more broadly it can using information that is not readily available to others (such as insider trading or leaks from a government department. At all times, it arises where the private interests of an individual conflicts with the interests of the company, employees, customers, shareholders or community.
Role of the compliance officer
A compliance officer should highlight where conflicts of interest can arise and ensure that they are properly managed. Conflicts of interest can occur when dealing with external parties (such as customers) or making decisions within the organisation. They can be generic (occur frequently as part of the business model) or ad hoc.
Where a generic situation occurs, a program should be put in place to help identify, deal with and report conflicts. A common example where a conflict policy can be put in place for a generic issue is a ‘gifts, meals and entertainment program’. These policies usually have a monetary limit to prevent the receipt of extravagant gifts, so that staff do not feel conflicted when making future financial decisions that involve the gift-giving vendor, who might expect to receive preferential treatment.
In relation to ad hoc situations, staff should be provided with training to help identify when the situation has arisen, as well as how to seek assistance from the compliance team. For example, the management team may be looking at tenders for a new piece of equipment and the CFO notices that he has shares in one of the companies that have submitted a tender. In this situation, the CFO should excusive himself from the process and contact the compliance officer for further instructions.
Why have a conflicts of interest program?
A robust conflicts of interest program ensures that conflicts are avoided (where possible) and dealt with promptly when controlled. An effective conflicts of interest program removes the dilemma in having to deal with the conflict of interest in the first instance.