Speaking Up: Your Best Business Risk Management Tool

The Ethics & Compliance Initiative’s (ECI) 2018 survey, “Ethics & Compliance in the Workplace” (which surveyed 5,101 workers about workplace culture and whether they reported misconduct when they saw it) should be a wake-up call to anyone whose finance and accounting role includes risk management oversight. What the survey makes clear is that most companies are not fostering a “speak up” environment, and are neglecting a very important risk management tool.

According to the survey, just 21% of employees say their company has a strong culture, grounded in good values.

Pat Harned, chief executive of ECI, noted, “This makes little sense given information that comes out after a scandal often points to a culture where people knew about wrongdoing but didn’t speak up.”

“Speaking up” by the rank-and-file employee who sees questionable actions or behavior can be the best defense for a risk manager. It’s a way for him/her to address problems before they escalate and become headline news.

But if these employees do not feel like they will be supported in coming forward, they won’t. Worse if they feel like they will be retaliated against for doing so, they definitely won’t. ECI survey data supports this. For instance, while 69% of respondents said they reported misconduct they saw, 44% said they suffered retaliation for speaking up.

“Anyway you look at it, it’s a troubling thing,” Harned said. “When workers have high rates of retaliation they are far less likely to report things in the future.”

The flip side of this argument might be that when workers feel respected and heard, they will. While culture is often set at the top with senior executives, managers can feel empowered to do their part to create a strong culture from the bottom up.

So what can managers do to create a “speak up” culture?

Trust² is the cornerstone of every healthy employee-manager relationship. HR experts recommend managers have an open-door policy, but accessibility may not be enough. Managers can convey interest or noninterest in issues in a variety of ways including body language, tone of voice, use of words. Harvard Business Review³ (HBR) documented the many ways managers’ best efforts to increase trust with employees backfires (i.e., asking for anonymous questions to be sent in to town halls for question and answer sessions). The anonymity factor, according to HBR, actually can reinforce employees’ ideas that their organization is one where they can’t speak up.

But the most frequently cited reason employees don’t speak up is because they don’t think their manager will do anything about their concern. This gets to the root of a problem IMA^® (Institute of Management Accountants) has been diligently working on for some time; establishing a risk management culture from the top down. In 2014, IMA partnered with the American Association of Chartered Accountants (ACCA) to publish, “A Risk Challenge Culture,” which characterized what healthy risk management looks like in interactions with executive leadership and board members.

Elements of this kind of culture include:

• Professional skepticism and board oversight of risk
• Board diversity and expertise development in enterprise risk management (ERM)
• Conversations about roles in a risk challenge culture
• Information asymmetry and risk reporting
• Awareness of decision making processes and cognitive biases
• Risk culture – assessment, diagnostics, and signs
• Defining risk appetite, strategy, and incentives

IMA’s approach to risk management is that it should be an ongoing activity, across the organization. Enterprise risk management (ERM) should be a term both the rank-and-file employee understands as well as the CEO. This way everyone is involved and everyone feels responsibility. Employees may be more likely to “speak up” when this type of culture is clearly defined and when executive leadership shows commitment to it.

IMA, as the leading, global professional association for accounting and finance professionals, seeks to promote best practices in risk management and its corollary, ethics. Both Jeff Thomson, CMA, CSCA, CAE and Dr. Curtis C. Verschoor, CMA, CIA, CPA, CFE, are well-respected experts in ethics (both were named Thought Leaders by Trust Across America and are Lifetime Achievement Award recipients). Verschoor writes frequently for IMA’s Strategic Finance on topics related to ethics. A compilation of his articles is available in the IMA bookstore.

The health and sustainability of an organization is largely dependent on its culture. IMA thought leaders have observed this begins at the top. In our February issue of Strategic Finance, Anne M.A. Sergeant, CMA, Ph.D., associate professor of accounting at Grand Valley State University and member of IMA’s Committee on Academic Relations and IMA’s Grand Rapids Chapter, describes what elements make a strong corporate culture:

• Personal Accountability: Things that happen within the organization are a result of individual-action not external forces
• Teamwork and Collaboration: Working together in an environment of mutual respect to achieve a common goal
• Change Mind-Set: A willingness to readily adapt to change
• Integrity and Ethical Values: A congruence between words and actions
• Value-Focused Orientation: Individuals understand the “why” of their actions

Risk within these types of cultures is more easily identified and mitigated. That is why it is so important for those charged with risk management to identify weaknesses within their existing workplace cultures and to advocate for change.

Footnotes

1. “The Morning Risk Report: Whistleblower Retaliation Rising,” The Wall Street Journal, March 19, 2018
2. “Four Ways to Create a ‘Speak Up’ Culture and Drive Your Business Forward,” Training Journal, May 9, 2017
3. “Can Your Employees Really Speak Freely?” Harvard Business Review, January/February 2016