When consumer-facing businesses make headlines for all the wrong reasons, questions are asked as to whether poor business conduct can be blamed on a few or whether the people at the top can actually set the tone and culture of the entire organisation.
Scrutiny from regulators and the public mean that organisational conduct is more important than ever, but what is the cost and danger of not taking this seriously?
Growing privacy concerns and customer demands for ethical sourcing are forcing consumer-facing businesses to realign their risk management efforts. In a connected world where internal risk management failings can quickly find their way to the front page, risk management is a holistic question of culture and conduct which reaches from a business’ frontline all the way up to the boardroom and back along the supply chain.
Consumer-facing businesses face close scrutiny from all sides, with both customers and corporate regulators holding them to account for their actions and the corporate culture which drives those actions.
The notion of culture is not new but now we’re more consciously aware of its importance and that we can shape it. The corporate regulators are also aware of the importance of culture and they’re expecting businesses to do more and take on the responsibility of rectifying problems with corporate culture and conduct risk.
The practices of supply chain partners around the world has become a much more significant risk to consumer-facing businesses and brands in recent years. Mainstream consumers have become more concerned about ethical sourcing, while the rise of social media has brought issues in developing nations to the attention of consumers around the globe.
The power of social media also means that businesses need to be on the front foot when it comes to product recalls, service outages and other issues which impact on their customers. Businesses need to ensure that they’re seen to respond quickly, with the best interests of consumers at heart, which can require a significant cultural shift for some organisations.
Defining, assessing and reshaping business culture – both internally and in dealings with customers and the supply chain – is not a simple one-off compliance exercise, it requires ongoing tracking. Tools for assessing corporate culture can include conducting internal surveys and interviews as well as workshops. While corporate culture might be propagated by the board, it is important to objectively measure whether the organisation is actually meeting its articulated cultural objectives and to determine what success looks like in the different facets of the business.
Australian regulators are clear on the fact that they can’t regulate culture, only conduct – or more explicitly, the results and outcomes of poor conduct.
The Australian Securities and Investments Commission defines conduct risk as a risk of inappropriate, unethical or unlawful behaviour by management or employees. This behaviour can be deliberate or inadvertent, perhaps caused by inadequacies in policies, procedures and training. Consumer-facing businesses with a poor internal culture can quickly find these shortcomings exposed to the world.
There’s no simple checklist to tick off to ensure your business culture is conduct risk compliant. The process of combating conduct risk with good corporate culture requires an organisation to completely evaluate the way it does business.