In 1973, a few Californians began selling clothing and climbing gear to hikers and explorers visiting the state’s numerous parks. Little by little, the small team of individuals grew into a multinational company, eventually becoming one of the most recognizable brands in the industry.
In 2019, Patagonia received the Ethical Consumer's best rating for supply chain management. The company has consistently demonstrated exceptional ethical leadership, donating millions to climate, political, and human rights initiatives. To say they have a culture of ethical risk management is an understatement.
Conduct risk exists at all levels of every company. Every single day, a team could open an email, make a deal, or release a statement that suddenly puts the entire company at risk of compliance issues or regulatory fines. So, how do you create a company culture that lowers these risks and allows you to successfully navigate your given niche with fewer worries?
The culture of an organization will define its behavior. If you have team members downloading personal email attachments, you will cultivate behavior that leads to more viruses and malware throughout your network.
Culture matters deeply when you’re considering behavioral risk indicators in your team. Maybe you notice repeated overrides of internal controls or toxic leadership patterns that silence those wishing to stand up to wrongdoing. Either way, when you leave these signs unchecked, you expose the organization to legal, operational, and reputational risk.
The good news is you can “choose” your ethical culture. Develop one with intention, declare it for all stakeholders to see, and the world will respond to your endeavors.
The number one concern you can have when cultivating a culture to resist conduct risk is consistency. As you read through these different aspects, keep in mind the idea of consistency as a tool to reinforce these controls.
The company with a thief for a leader will encourage followers to steal. Your road to ethical standards must involve a Top-Down perspective. The C-suite and leadership of your team need to be held to a higher standard that will trickle down to the company’s members.
JetBlue is an example of this strategy. In 2008, the airline left passengers stuck on a tarmac for over 5 hours. By the end of the day, over a thousand flights were negatively impacted by this delay – not to mention incredibly upset clients.
The CEO wrote a letter of apology, went on a tour to build marketing, and offered information about fair compensation in the future. That accountability is what allows clients to remain loyal to the company and why it survives today.
KPIs and quarterly targets are sexy. They inform your company about the raw numbers you need to hit to remain successful. However, these should not be your ethical anchors.
A workplace should be value-focused, meaning it seeks out behavioral risk indicators as early as possible and addresses them to better course-correct in the future. This strategy often prevents long-term adverse effects before they escalate.
No company reaches the top without making a few mistakes. “New Coke” from the Coca-Cola Company was a dramatic failure. Instead of consumers embracing the new formulation of the beverage they had enjoyed for over 99 years, they revolted and blacklisted the company. It drove sales down and caused the soda to lose market share.
Instead of calling it quits, the international soda pop maker learned some incredibly valuable lessons:
All these lessons help Coca-Cola readjust and create a risk culture that evaluates potential change more openly. They learned and adapted, allowing the company to remain an industry leader.
It is perfectly acceptable to shift employee mindsets through ethical training. Just be sure the training being pushed is relevant, engaging, and tailored to the actual situations your team is likely to face.
You don’t have to make it feel like homework or boring case studies. Seek out interactive ethical training and involve your leadership in the process. You can create a phenomenal opportunity by having a leader point out an ethical mistake during one such training that the speaker then “walks” everyone through to see what should have happened.
Not only will you gain strategic insight, but your team will see it’s okay to discuss these topics.
A big part of creating an ethical culture rests on feedback. From the janitor sweeping the floor to the CEO, you want to remove the risk culture over time.
Risk and ethics are not static. They will evolve, and your employees will often be the first to notice any red flags. While you can leverage modern platforms like Pirani’s risk management solutions, you also want to ensure there are feedback channels so every team member feels empowered to speak up or point out an issue. That allows you to act first instead of reacting to a risk.
You must address workplace bias as quickly as it crops up. Staying silent is toxic and will lead to more significant issues down the road. Anything related to gender, race, generation, or cognitive bias will undermine your risk culture and create blind spots.
It’s easy to see how bias creates conduct risk. Imagine having females on a team of network admins. The executives are all male and view females as “less than” equal. Would these executives listen to potential risk if they write off an entire team, all because of gender?
Blind spots open up risk threats to businesses. You must do all you can to close them back off and shine a light on them through an appropriate culture.
Compliance is the foundation for any reliable, ethical risk management strategy. You have to change the narrative of “no” to one that welcomes a link between all rules or guidelines. You can reinforce these narratives by embedding compliance into your culture.
There are examples of compliance leadership all over the world. Patagonia is just one, but there’s also Aflac for its fair purchasing, Ecolab for water and food safety, Kao Corporation for gender equality, and Kellogg Co. for its zero waste initiatives.
You can tie compliance with goals into your ethical framework and use them as stepping stools to better marketing and achievement.
Finally, be clear on all your policy initiatives. Leave little to no room for misinterpretation and keep all language simple. You want all codes of conduct, internal procedures, and escalation pathways to be extremely clear for everyone involved.
Remember that ethical risk management is not simply a checklist. It is a living, breathing animal best addressed through an adaptable and aware mindset. Culture is how you take that mindset and turn it into positive behaviors that support every interaction and decision a company makes.
Technology by itself will not cultivate a strong ethical culture, but with the right tools, it can certainly make building one faster and more consistent. Platforms that quickly identify behavioral risk indicators or streamline transparent auditing enable you to better manage ethical concerns in real time.
Solutions like Pirani support businesses and organizations by actively assessing, mitigating, and identifying risks. It empowers decision-makers to inject compliance into the culture without slowing performance.
Ethics cannot be a side conversation only a few team members dream up in a room. It is a central framework that helps a modern company compete, operate, and thrive. Use tools like Pirani and let risk management be a benefit and not a concern for your team.
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