Ethics is often seen to be a luxury, or a nice-to-have; if deployed suitably publicly, it might enhance an organisation’s licence to operate, or give their brand a virtuous glow. The business case for ethics is, however, less cynical and more strategic: it’s not so much about brand personality than it is about risk.
Risk has become an industry. Associated with compliance and regulation, risk for most executives is about a complex process of analysis and scoring. Ultimately this can be coded into technology and the robots can do it for us; residual risk as a discipline will be about this coding, and about the interface between man and machine. This is largely a technical matter which is not germane to governance, although policy pertaining to it ought to be.
For a board, there are two crucial aspects of risk that have been crowded out by an obsession with the minutiae of professional risk management. These are those strategic matters of opportunity and threat.
In investment, risk often has a positive quality – you gain more return from a risky investment that pays off, by definition. Starting a business is a risk, and those who laud entrepreneurs do so largely for their bravery in shouldering this risk as much as approve their creativity in spotting gaps in the market. So should boards not spend more time scanning the horizon for risks that other players in the market are too scared to take? Should the Board not also remain curious about risks not being taken, and why? Would it not be instructive to dwell on risk appetite and readiness, as a metric of potential and agility? We’ve taken emotion out of risk, but perhaps the things that make us feel sick with fear are where our braver industry fellows will next take profits.
Boards generally do concern themselves with risk as threat. Sadly they do so by availing themselves of staff-generated risk registers and the odd matrix that weights impact and probability. These can assist, but where were they during each and every crisis we have had, and did they save the board then?
I have a more reliable method: conscience. Ethics is the canary in the mine. One man’s scruple today is tomorrow’s lawsuit. CDOs? LIBOR? PIP? You can bet there were many who quashed their uncomfortable feelings about these matters because the business case was strong, the peer pressure unassailable, and morality remains a flabby muscle in this arena.
Here is an idea. Should not boards find ways of worrying together about all those areas of operation that make them feel queasy? Should the staff not also be encouraged to find ways to both hear and voice these internal alarm bells early, because these will ultimately translate into material operating risk? A truly and pro-actively diverse workplace helps with this, not least because those of varying faiths and cultures will naturally differ on matters of conscience. All this noise might just show you where your next crisis is brewing.
A coda. About women and robots. First, the empirical facts suggest that an overly male and stressed environment exacerbates risk, as a matter of body chemistry. Proactive gender balancing should be on the board’s agenda for precisely this reason. Second, the robots who are to steal our jobs. They will find it easy to do so if we keep seeing risk as a technical process, and not as a messy and distinctively human emotional and ethical phenomenon.