Published on November 16, 2023, 8:33 pm

In a time of uncertainty, it is crucial for companies and organizations to prioritize their ethics and compliance (E&C) efforts. This is the key recommendation from LRN Corporation’s report, the 2023 edition of LRN’s E&C Program Effectiveness Report. The report surveyed over 1,850 ethics and compliance professionals across different industries and countries.

According to the report, about 85% of respondents stated that their ethical cultures had become stronger as a result of facing challenges in the past year. More than half of the respondents also praised their executives for considering ethical considerations in business decision-making. Additionally, 84% mentioned that their organizations relied on values rather than strict rules to motivate employees to make ethical choices.

However, the research also emphasizes areas where improvement is needed. A significant number of respondents pointed out inadequate internal systems (76%), staff shortages (73%), budget limitations (73%), and employee disengagement (68%) as major obstacles to program effectiveness.

Susan Divers, senior advisor at LRN and lead author of the report, highlights the performance gap between organizations that are doing the minimum and those striving for maximum ethical standards. She emphasizes the importance for boards and C-suite leaders to allocate sufficient resources and support E&C programs in light of personal accountability regulations and emerging complex risks.

The report also uncovered other notable findings:

– Despite global conflicts and sanctions on multiple countries, 25% of respondents plan to enhance trade controls and sanctions training while 45% have strengthened risk controls in this area.
– Around 60% felt that their board of directors actively addressed misconduct by senior executives. Furthermore, three-fifths reported that their organizations have formal requirements to consider ethical behavior in performance evaluations, promotions, bonuses, and hiring for key control functions.
– Approximately 44% indicated that their organizations disciplined or terminated senior executives or top performers for unethical behavior in the past year – with 76% subjecting them to financial “clawback.”
– 52% of respondents reported that ethical and compliance factors led to substantial modifications or even abandonment of business initiatives when necessary.
– While 52% of respondents used data and metrics to assess program effectiveness, only 20% enhanced their ability to capture and understand such metrics.

Kevin Michielsen, CEO of LRN, highlights the challenging environment businesses face today. From growing regulatory scrutiny and economic uncertainty to stakeholder activism, trade sanctions, and supply chain disruptions, companies must weather this “perfect storm.” He emphasizes that fostering an ethical culture is not only crucial for compliance but also impacts business performance.

In conclusion, as companies navigate the unpredictable landscape ahead, it is evident that prioritizing ethics and compliance will play a significant role in their resilience and success. Organizations should address the gaps identified in E&C programs to ensure optimal performance while adhering to values-based approaches. By upholding ethical standards in decision-making processes, organizations can build trust among stakeholders and effectively navigate the complexities of the business environment.

Note: This article is a rewrite based on an original article published by FutureCIO.


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