Resolving Conflicts of Interests: A Guide

Conflicts of interests are common occurrences in various settings, spanning from corporate boardrooms to public service organisations and professional spheres. It is crucial to address these conflicts ethically and effectively to ensure fairness, transparency, and maintain trust among stakeholders. In this article, we will delve into the art of resolving conflicts of interests, exploring various strategies, ethical considerations, and best practice.

Contents

• What is a Conflict of Interests

• Identifying Conflicts of Interests

• Understanding the Impact of Conflicts of Interests

• Strategies for resolving Conflicts of Interests

• Challenges in Resolving Conflicts of Interests

What is a Conflict of Interests?

Conflicts of interests can come in many forms. Primarily they can be categorised into six different types:

• actual and potential conflicts

• direct and indirect conflicts

• financial and non-financial conflicts

You can read more about these six different types of conflicts of interests in our guide here.

The three different types of conflicts of interests outlined above are not mutually exclusive – an interest that could cause a conflict could fall into more than one category.

A conflict of interests refers to a situation in which an individual or organisation is faced with competing interests that could potentially compromise their ability to make fair and impartial decisions. This conflict arises when there is a clash between personal, financial, or professional interests and the responsibilities or obligations one holds in a particular role or position.

In such scenarios, the individual or organisation may be influenced by personal gain or external pressures, leading to biased decision-making or actions that prioritize personal interests over the best interests of others involved. Conflicts of interests can occur in various settings, including business, government, healthcare, academia, and nonprofit organizations.

Identifying Conflicts of Interests

Recognising and understanding potential conflicting interests is the first step towards effective resolution. These conflicts can arise in different forms, such as financial, personal, or professional, and can have significant implications if left unaddressed. Early detection is essential to prevent conflicts from escalating and causing harm.

How do you identify conflicts of interests?

People should be asked to declare conflicts of interests regularly, and at least in the following circumstances:

1. on appointment

2. within 28 days of becoming aware of a conflict of interests

3. annually if no other declaration has been made in the last 12 months

Examples of the kind of interests people should disclose include:

• a change in personal circumstances such as taking a second job

• potential conflicts like having a close friend or family member working for a direct competitor

• the offer of any gifts, sponsorship or hospitality in relation to their work

You can read more about gifts, sponsorship and hospitality here.

Understanding the Impact of Conflicts

Conflicts of interests can significantly impact decision-making processes, potentially leading to biased outcomes or compromised integrity. The consequences of unresolved conflicts can be far-reaching, affecting organisational reputation, stakeholder relationships, and even legal ramifications. Transparently addressing conflicts is crucial in maintaining trust and accountability.

A key thing to remember with conflicts of interests is that the perception of a conflict of interests can be as damaging as an actual conflict. Therefore it is important to address any type of conflict of interests promptly and openly.

At their extreme failing to identify and resolve conflicts of interests could lead to accusations of fraud and bribery, or other forms of corruption, and all the legal issues that could bring.

Strategies for Resolving Conflicts of Interests

To navigate conflicts effectively, open communication and dialogue are key. Establishing conflict resolution frameworks, such as mediation or involving a neutral third party, can facilitate constructive discussions and lead to satisfactory outcomes. Collaborative problem-solving encourages stakeholder participation and ensures a balanced approach to conflict resolution.

One of the most important things you can do is have a clear and comprehensive conflicts of interests policy. This should be owned by a senior manager and apply to all employees and other workers.

The policy should clearly set out your reporting requirements, your decision making process, and the consequences of failing to declare any real or potential conflict. To encourage compliance you should be clear that any disclosure will be confidential.

When a conflict of interests is declared the next step in your process is to make a decision. How can an employee continue to do their job while as an employer you have put in place effective compliance systems?

Options for Resolving Conflicts of Interests

There are a number of options you can apply to resolve any conflicts:

• restricting the individual concerned from a particular piece of work. For example, if the trustee of a charity also works for a supplier bidding for a contract, the trustee should be excluded from the contract award process.

• ensuring any person who has a conflict declares it at the start of any work that could be affected by that conflict. This could apply at a board meeting where a director may have a conflict but their perspective on a topic is still valuable. The declaration should also be included in the minutes.

• moving someone to other duties. This is something you might do only in extreme circumstances, but it can be the right approach if there is no other way of resolving the issue.

Remember your objective is not to avoid all conflicts of interests. They will occur, especially for senior managers or directors. The key is to achieve effective compliance by managing them well.

Challenges in Resolving Conflicts of Interests

There are a number of risks and challenges involved in successfully resolving conflicts if interests.

The primary risk is of non-compliance. Anyone who has an interest naturally has at least some small incentive to pursue it over their employer’s wishes. Therefore compliance needs to be monitored. What that looks like depends on the interest or the conflicts it creates. Using the example of the Trustee, above, it would be quite simple to check they are not involved in activities that create a conflict.

The second risk is that stakeholders think your approach is wrong and you have not resolved conflicts effectively. You should be prepared to be quite public about any declared interests. For example, you could:

• publish your code of conduct or conflicts of interests policy

• publish an anonymised register of declarations of interests

• be prepared to answer questions from stakeholders about how you apply your policies and the measures senior managers put in place to ensure compliance.

• ensure there is appropriate training for employees, managers and the board.

The third is that you fail to repeat your disclosure exercise and check that your approach to managing conflicts is still effective. effective compliance depends on regular checks, even over a period of years. Part of your responsibility for managing conflicts is applying the rules consistently over time.

If you want to know more about resolving conflicts of interests

This content is a small part of the Conflicts of Interests course provided by WuDo Solutions. This five-star rated, expert led course will tell you everything you need to know about identifying and managing conflicts of interests, including counter-fraud and bribery, and dealing with gifts, sponsorship and hospitality. Find out more here.

Conclusion

Resolving conflicts of interests is a complex but vital aspect of ethical decision-making in all sectors. By understanding the various strategies, ethical considerations, and best practices, stakeholders can navigate conflicts constructively and maintain trust and transparency in their organisations and communities. Continued learning and application of these principles will contribute to a culture of ethical conflict resolution.