Mitigate the risk of unethical business with machine logic

Julian Dixon

July 18, 2018

Despite substantial investments in the likes of ethical codes of conduct, ethics training and compliance programmes, unethical behaviour is on the rise. And while most managers mean to run ethical organisations, corporate corruption is rife.

This issue is not necessarily because managers intentionally set out to run businesses that shun decent moral principles – in fact, that’s pretty rare. 

More often than not, they become blind to unethical behaviour – especially when it’s in their interest to remain ignorant. They may even unknowingly encourage it.

Of the 4,100 individuals from 41 countries EY interviewed in 2016/17, 1 in 5 were prepared to act unethically to improve their own career progression. This figure jumped to 2 in 5 when asked if they believed their colleagues would do the same.

In the last two years, just 39% of employees have heard senior management communicate about the importance of maintaining high ethical standards and behaviour when conducting business, and 52% of respondents have had information or concerns about unethical conduct in their company.

It’s not uncommon for managers to reward results rather than the quality of the decision itself. Good outcomes, such as an increase in profitability, may be driven by unethical tactics like using slave labour to cut operating costs. Ethical blindness can also be especially apparent when the behaviour is carried out by a third party, or when it develops gradually.

EY argues that given the greater scrutiny that organisations face from regulators, they need to ask themselves how they can ensure high ethical standards are maintained by a workforce that may be more motivated by personal gain than by company loyalty.

Crucially, regulations relating to the Anti-Money Laundering Directive are now not just focused in the financial services sector. Regardless of the sector, large corporates in particular need to know their suppliers and customers inside out to avoid a potential ethical and reputational disaster. This can be challenging when faced with the likes of complex multi-country, multi-partner supply chains that make it difficult to identify unethical activities.

EY urges companies to leverage new technologies and machine logic to detect misconduct as part of an effective risk management process. This would allow misconduct to be identified, even when it is not reported by employees.

A good example of such technology is our screening solution, which is available in its own right or as part of our AML Augmentation Platform. 

The advanced system automatically screens customers, suppliers, employees and transactions to check against any involvement in activities that are controversial, criminal or related to terrorism.

The introduction of a screening system removes the high dependency placed on employees to report unethical behaviour. It also provides a substantial safety net to flag up any activities that are potentially unethical and warrant immediate further investigation.

This is especially important given that almost half of those who have had concerns about unethical conduct have faced pressure to withhold information, and just over half would not report due to a concern over their future career.

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Learn more

To find out more about our screening solution, please call 020 8242 4828 or email info@fortytwodata.com.
Read more about our AML Augmentation Platform here.

References

Havard Business Review. 2011. Ethical breakdowns. https://hbr.org/2011/04/ethical-breakdowns

EY. 2017. Human instinct or machine logic: Which do you trust most in the fight against fraud and corruption? Europe, Middle East, India and Africa Fraud Survey.

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