Whenever interests are declared an assessment must be made of any actual or potential conflicts they may create, and a decision must be made on what (if anything) should be done to manage the conflict.
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Declared Interests: Making Decisions
The decision maker in most instances will be the declarer’s line manager. The decision that make must be:
- recorded in the register of interests alongside the interests declared
- communicated to the declarer
If the interests declared are highly complex or difficult then the decision can be escalated to an appropriate person. This could be the Company Secretary, its legal representative, or an independent Board member. What the right solution is depends on your company but, as with all elements of managing conflicts of interests, it must be a person that people perceive as appropriate.
The decision they make will depend on the nature of the interests that are declared. Examples of things people may decide is the best approach include:
- Accept and monitor the interest
- Exclude people from certain types of activities or decision making processes
- Make a public declaration of the interest
- Get rid of the interest causing the conflict
- Change the role or responsibilities of the person declaring the interest
- Highest risk conflicts: COI Guardian may seek external advice
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Making Your Decision: A Risk Based Approach
To ensure the right decision is made about any declared interest you should consider your appetite for and tolerance of risk.
Remember conflicts of interests make present various threats, including the reputational risk of perceived conflicts.
Risks are a combination of likelihood (of the risk becoming an issue) and consequence (the impact if it did). Therefore there will be a level of risk above which you will want to take action.
Exactly what they level is depends on a number of factors. They in turn depend on the nature of your business (industry, size, location) and your willingness to take and accept risks.
This means your approach to managing declarations and conflicts of interests can be broken down into four key areas depending on where the line between low and high likelihood, and low and high consequence, sits for you.
Essentially you can use likelihood and consequence to map declared interests on the grid below, which in turn informs what action to take.
Once your decision is made it naturally must be shared with the declarer. This must be done in writing, so that you have a record of both the decision and that the declarer has been told what it is.
The communication of the decision should explain what the decision is, and how it will be implemented. It should also point people to sources of advice and support and in line with policy documents set out the consequences of non-compliance.
It is also critically important to be consistent. The same kind of decision must be made for the same kind of interests held by people in similar roles.
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Interested in Learning About Conflicts of Interests? Get the brochure here“
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Gain the practical skills you need to identify and manage conflicts of interests with this five-star rated training course.
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