Managing conflicts of interests

The importance of managing Conflicts of Interests, arises in part because conflicts create a perception problem.

More than anything else, it is the perception of wrongdoing or potential wrongdoing that matters. Therefore you need appropriate systems for identifying and managing conflicts of interests.

This is because the interests that people have and the conflicts that may arise between them can exist without anything going wrong, or any wrongdoing occurring. Instead, it is how these interests could be perceived to have influenced decisions and action that could lead to challenge.

The avoidance of doubt is key to developing the organisational resilience. You can do this through the development and management of appropriate systems and processes to identifying and manage conflicts of interests.

How do we do this?

First and foremost, it is important to recognise that interests do exist. This is to be expected and sometimes celebrated. The objective is not to prevent interests – it simply isn’t possible. Nor is it to treat all interests as a problem. They aren’t. But they do present a risk. As with all risks reasonable and proportionate steps must be taken to manage the risk.

The first thing to do is to ask all staff, perhaps in stages if you are a large organisation, to complete a declaration of interests

And as with all good governance, and effective systems, getting it right means identifying and tackling potential problems before they become crises. Remember, interests in their extreme can lead to allegations of fraud, bribery and corruption.#

What is an interest?

Many people assume that interests are solely financial in nature, or relate directly to the individual or the activity in question.

In fact interests are much broader than that. Interests can be:

• Direct – a person performing a function has an interest that conflicts with the performance of the function;
• Indirect – a person has a close personal relationship with another person, and their interests conflict with the delivery of the person’s function;
• Financial
• Non-financial
• Actual – a conflict exists;
• Potential – a conflict could exist in the future.

That’s quite broad, isn’t it?

What does all of this mean?

An example of a direct, financial, actual conflict of interests is when someone has a second job with a direct competitor. That person could share proprietary information or favour one employer over another when seeking customers of delivering work.

An example of a direct, non-financial, actual conflict of interests is when someone has a job or provides a service where a close friend or family member is a service user. There is a temptation to prioritise the friend/family member over other in terms of access to or quality of service.

An example of a direct, non-financial, potential conflict of interests is when a member of staff in HR strikes up a close personal relationship with a colleague. What if that colleague raised a grievance or was subject to disciplinary action?

Even if in any of these scenarios the person with the conflict acted entirely appropriately they can always be perceived to have done something wrong. All of these instances, when they occur, must be managed. You will also see by now that many, if not most people will have at least one conflict of interests.

Where to begin?

The first thing to do is to ask all staff, perhaps in stages if you are a large organisation, to complete a declaration of interests. Those who have no interests to declare should complete a ‘nil return’. This is so you can be sure no-one is missed out.

Once the interests are declared they need to be reviewed. Then a decision needs to be made on what, if any, action is needed.

For many, minor actual or potential conflicts it will be sufficient to record the interest with no further action.

Options for Managing Conflicts of Interests

With others your options include:

• To mitigate the risks – this can involve restricting or removing a person’s involvement in a piece of work or activity; or restricting or removing their authority to make certain decisions about it.
• To avoid the risks – this might mean stopping the activity in question. This could mean not bidding for a particular contract or tender, or a simple as changing supplier.

For very senior management you should consider publishing declared interests. This shows you are aware of the interest and you can show how you are managing it.

You can read more about strategies for managing conflicts of interests here.

Now that you have collated interests and made your decisions, you should pull this together into a register of interests that is regularly updated.

Going forward you must repeat your exercise regularly – annually is often considered appropriate. However, people must be proactive and declare interests when their circumstances change and interests start or stop; and in meetings where decisions or discussions relevant to the interest are due to take place so a decision can be made how to handle the conflict at that moment.

To get this right it is important to engage with and train your staff so they know what interests are; why they need to be declared; and what happens w hen they are.

In many instances having an independent party do your conflicts of interests exercise and recommend decisions and actions on individual declarations can also help organisations both be assured of robust conflicts of interests systems and resilience to challenge.

Overall managing conflicts of interests is an ongoing cycle, and should never be a one-off exercise.