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Ethics in a Professional Environment Explained

Practitioners who operate in a Professional Environment, be it Corporate Services, Taxation, Legal & Accountancy, Banking, Security Investments, or Insurance, need to behave and also be seen to behave in an ethical and professional manner.

The purpose of ethical behaviour is to increase the confidence of all the stakeholders involved in a business relationship, which will lead to increased trust in the practitioners when providing services to clients.

The below article will provide a coherent snapshot of the factors that would help practitioners behave in an ethical manner.

1.     Components of ethical behaviour

There are a number of components that a practitioner must follow in order to achieve the required standard of ethical behaviour that is expected from a practitioner operating within a professional environment:

–         Objectivity

A practitioner is said to be objective if s/he does not allow undue influence of others, bias, or conflicts of interests to intervene with professional or business decisions.

This means that a practitioner should be independent of the client, and not have any underlying business or personal interest that may unduly influence him/her to exercise objective and sound judgement. Examples of threats to objectivity include having shares in a client’s company, receiving high-value gifts from said client, or having a high fee dependency on one particular client.

–         Professional behaviour

A practitioner, no matter what kind of professional service being offered, must always comply with the relevant laws and regulations that governs his/her profession.

–         Competence

A practitioner must achieve and maintain professional knowledge and skill at the level necessary to provide a client with competent and professional services. This includes professional certifications, university degrees, as well as continuous professional development (CPD) courses.

It is also vitally important that practitioners keep up to date with ever-changing developments in regulations and standards in order to ensure that the services provided meet all requirements as mandated by law.

–         Integrity

Having integrity means that a practitioner must always act in an honest and straight forward manner when providing services throughout the duration of the business relationship.

–         Confidentiality

The principal of confidentiality is a very important principal that practitioners must adhere to when providing professional services. A practitioner becomes privy to a vast amount of sensitive information during the course of providing a professional service. It is therefore important that such information is not disclosed to any third party unless there is the duty to disclose by law or by competent authorities. Confidentiality also means not using such information for one’s own personal benefit.

2.     What to do when faced with threats to ethics?

First and foremost, it must be said that a practitioner will come across various threats to ethics when providing professional services. Whilst it is not within the scope of this article to go through all the potential situations and threats that a practitioner may face in his/her practical work, there is a generic solution that can be used when faced with such threats.

Whenever a practitioner is faced with a threat to ethics, the first step is to identify the threat. The second step would be to assess the threat to see if it would seriously affect the objectivity of the practitioner. The next and last step would be to apply the safeguards necessary that would either eliminate the threat or else reduce the threat to an acceptably low level.

By way of example, imagine a practitioner holds shares in a company that wishes to engage the practitioner to start providing professional services to them. Firstly, the practitioner must identify the threat – holding shares in a client company. Secondly, the practitioner must assess the threat – holding shares in a client company leads to a threat to objectivity as the practitioner may want to maximise his/her return from the investment and may overlook certain factors that may influence the value of his/her shares and will therefore not provide his/her services in an objective and correct manner. Lastly, the practitioner must apply the necessary safeguards – in this case, sell the shares before providing any professional service to such client. 

3.     How to deal with conflicts of interest? 

Conflicts of interest may arise when a practitioner is appointed for two companies that compete with each other or that trade with each other. A practitioner must always act in the best interests of their clients. However, if conflicts of interest exist, the practitioner should ensure that any work conducted does not lead to the interests of one client being adversely affected by those of another client, and also to ensure that any breaches of confidentiality are prevented.

There are a number of measures that practitioners can take in order to deal with conflicts of interest that arise when servicing companies that compete in the same market or companies that trade with each other.

The conflict of interest must be disclosed to the relevant parties, providing as much detail as possible for it to be considered as an adequate disclosure. It is important that the practitioner, having disclosed the conflict of interest to the relevant parties, also obtains consent to act in light of such conflict/s of interest.

The practitioner may want to have two separate teams dealing with the two competing clients. This will help as there would be physical separation of confidential information which would help maintain confidentiality. Additionally, confidentiality agreements should be signed by all parties involved to prevent improper disclosure of sensitive information.

If the adequate safeguards cannot be implemented to prevent or reduce the conflicts of interest, then the practitioner must consider the possibility of ending the business relationship that would result in such conflicts of interest accordingly.

4.     Different kinds of ethical guidance approaches 

There are a number of ethical guidance approaches that are followed by the various professions that the practitioners form part of. These approaches are mainly based on a principles-based approach or a rules-based approach.

A principles-based approach is performed on a best-efforts basis and is not a legal requirement. It simply requires compliance within the spirit of the guidelines issued by the respective ethics bodies of the professions in question. The principles-based approach requires the practitioner to use professional judgement in applying the ethics guidelines of his/her profession. The major advantage of the principles-based approach is that it is flexible, so it can be applied to rapidly changing situations.

The rules-based approach to ethics are legal requirements that practitioners must follow in their day-to-day operations. The main advantage here is that the rules are clearly defined and there is no room to manoeuvre in one’s favour. Perhaps a pitfall of the rules-based approach is that the ethical rules may need frequent updating in order to ensure that the rules will apply to new, ever-changing situations. 

Concluding remarks 

Conducting business in an ethical manner is vitally important for all stakeholders, not just to those tasked with managing a company. A company deals with many stakeholders, such as employees, shareholders, the government, the general public, and third-party suppliers amongst others, and acting in an ethical manner will help instill confidence for all stakeholders involved in the running of a company.

Failure to follow ethics rules and guidelines not only leads to grave reputational risks, but may also lead to reprimands, fines, as well as the suspension or withdrawal of licenses/authorisations required to operate.

Disclaimer: The above-mentioned article is simply based on independent research carried out by Dr. Werner and Partner and cannot constitute any form of legal advice. If you would like to meet with up with any of our representatives to seek further information, please contact us for an appointment.

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