Ethics Rising: A Culture of Compliance as Competitive Advantage
More and more, consumers are choosing the institutions they do business with based on a perceived set of shared values. When those values are breached, the court of public opinion is more costly than any fine they would ever pay a regulator.
According to the 2020 Edelman Trust survey, only 56% of consumers find financial services trustworthy. And while trust in financial institutions has increased from 56% from 44% over the past eight years, 52% of consumers still believe financial institutions would take advantage of them if they could.
This owes, in no small part, to the financial scandals and crises that keep hitting the industry. But the best way to earn an employee or consumer’s trust is straightforward and predictable: be trustworthy.
We face a moment where ethical decision making and ethical strategies no longer just sound good, but are necessary to create strong compliance teams and more profitable organizations that can adapt quickly to change. What we have always hoped seems to have been proven true: there is a relationship between what is ethical and what is most expedient.
Enacting change from the inside out
Ethics and compliance professionals have the unique position of enacting change from the inside out, with the authority and urgency granted to them through their expertise with changing regulations and their directive to keep their organization in the clear.
But an ethical company is not simply formed out of strong policies and airtight rules, but instead requires an ethical company culture that starts at the top. In almost every financial scandal, the issue did not stem from a lack of good policy but from policies not being enacted.
A report by advisory firm LRN maintains that it is company culture that creates an ethical company, not policy alone: “An organization’s ethical culture determines whether its rules and procedures will be followed, ignored, or circumvented, no matter how thick the rule book may be.”
Because of this, ethics and compliance are becoming more intertwined. Compliance is no longer just checking a tickbox to satisfy a regulator. To truly mitigate risk from noncompliance? Doing the right thing, the ethical thing, needs to become an ingrained part of company culture.
Ethics and compliance as a competitive advantage
Based on the LRN report, when leaders balance compliance risks that arise in pursuit of new business:
- Employees are 4.3x more likely to question decisions when they conflict with organizational values.
- Employees are 3.8x more likely to do the right thing, even if it’s not in their personal best interest.
- Employees are 3.2x more likely to speak up or speak out, even in front of managers.
Because ethical culture, and only ethical culture, catalyzes ethical behavior. By setting a foundation for an ethical culture, not only do you reduce the risks and costs associated with non-compliance, but you also reduce the reputational risk of being viewed as untrustworthy, and, in turn, gain the trust of your employees, your consumers, as well as an advantage over your competitors.