Safeguarding organizations through integrity risk management
Integrity failures can destroy brand reputation, cause expensive operational disruptions, and result in regulatory penalties – making integrity risk an important strategic priority for legal and compliance departments. Pamela Verick, a principal at risk and disputes consultancy HKA, in a recent article examined how organizations can spot integrity risk factors and build a culture of integrity.
Integrity risk is the potential for negative consequences if organizations violate their values or principles. Ethics are the principles that guide moral reasoning, integrity is the expression of those principles through behavior, and fraud is when ethical standards are breached and integrity fails.
Verick says that a company can create an integrity culture through the cultivation of the four “INT” dimensions: internalization, intelligence, interaction, and interest.
- Internalization integrates ethical values and principles into everyday actions and challenges practices that counter to them
- Intelligence is the thoughtful application of moral principles – knowing what is right and why it is right
- Interaction guides communications with honesty, respect, and fairness regardless of context
- Interest reflects a commitment to cultivating a mindset where integrity is valued and protected
There a numerous risk factors that can affect an organization’s integrity, Verick says.
- Business climate – intense competition or financial stress could drive individuals to cut ethical corners to gain an advantage
- Weak governance – lack of oversight increases exposure
- Cultural misalignment – a disconnect between stated values and actual behavior
- Trust – blind trust can result in lapses in judgment and unchecked decision-making
- Leadership behavior – leaders that tolerate unethical conduct and bullying can stifle whistleblowing and show that integrity is optional
- Conflicts of interest – relationships favoring certain individuals undermine fairness
- Performance pressure – unrealistic goals might drive employees to take ethical shortcuts
- Recognition and rewards – valuing outcomes without regard for integrity encourages ethical shortcuts, while rewarding behaviors that don’t reflect integrity can discourage principled decision-making
According to Verick, some methods for assessing integrity risk include KPI analysis, which includes evaluating and comparing results of KPIs for legal and compliance programs; scenario planning and tabletop training exercises to explore ethical dilemmas; and analyzing internal data – including hotlines, surveys, exit interviews, and internal audits to determine trends for integrity risk.
“To thrive in an era of heightened scrutiny, rapid change, and complex regulatory and stakeholder expectations, organizations must treat integrity not as a compliance checkbox, but as a strategic asset,” Verick concludes.
