Conflicts of Interest: How to recognize and manage them effectively

What is a Conflict of Interest?

A conflict of interest is when an individual's personal connections or bias could compromise their judgment in the workforce. A conflict of interest typically arises from when a workplace scenario or decision is in conflict with the individual's personal interests, professional duty or potential for bias. The main way to manage a conflict of interest is through disclosure of the conflict. Other ways include recusal, divestiture and third-party oversight. Problems that can come from a conflict of interest can include poor decision-making, a loss of trust, reputational damage and legal and ethical violations.

Key Takeaways

• A conflict of interest is when an individuals’s connections or bias could comprise their judgment in the workforce

• Conflicts of interest stem from an individual's personal interests, professional duty or potential for bias

• Can potentially cause ethical and legal issues, reputational damages, operational inefficiencies and a loss of trust or credibility.

• They can be managed through disclosure, recusal, divestiture, ethics training and third-party oversight

Conflict of Interest Management

While conflicts of interest can be impossible to avoid entirely, there are ways of dealing with and managing conflicts of interests. Many companies have disclosure requirements in place that include rules and regulations outlining how conflicts of interest should be disclosed to relevant authorities. Ethics training can also help employees to learn how to recognize conflicts of interest and how to manage them. As listed previously, recusal (withdrawing from a project or scenario) and divestiture (dissolving investments) are other approaches to managing or dissolving conflicts of interest. Since there are different reasons why there may be a conflict of interest, there is no one singular approach to managing conflicts of interests that will work across the board. Instead, employees should first disclose conflicts of interest with management before working together to plan an appropriate way of managing it.

When Conflicts of Interest Aren’t Properly Managed

When conflicts of interests aren’t properly disclosed and managed, not only can this result in potential ethical and legal repercussions, but it also can cause reputational damages, operational inefficiencies and a loss of trust or credibility. Not only can a conflict of interest reflect poorly on the individual employee, but it could result in damage to the reputation of the whole company. In turn, failure to manage conflicts of interest can also result in a loss of trust and credibility from stakeholders. Across the board conflicts of interest have the potential to cause a variety of legal, ethical, reputational and operational issues that could potentially have long lasting effects. That’s why it’s important to not only have clear procedures for disclosing and managing conflicts of interest, but also having risk management and other business plans in place in case such a case were to occur.

Conclusion

A conflict of interest is when an individual's personal bias or connections could comprise their judgment in the workforce. Conflicts of interests typically stem from an individual's personal interests, professional duty or potential for bias. They can be managed through disclosure, recusal, divestiture, ethics training and third-party oversight. Failure to properly manage or disclose conflicts of interests could result in ethical and legal issues, reputational damages, operational inefficiencies and a loss of trust or credibility.