Kasturi Venkatesh on Conflicts of Interest [Podcast]

Joining us today from the San Francisco Bay Area is Kasturi Venkatash. Uh Kasturi is talking to us today about a session that she did at the Compliance and Ethics Institute entitled Ethics in Action, a fun guide to tackling personal conflicts of interest. Not a topic that's usually considered fun, so I was intrigued. Uh Castudi, thank you for joining us uh and for doing this session. Um conflicts of interest are often difficult to spot and manage, especially in global companies.

What are the some of the top issues that you affect

And when these conflicts are time sensitive, this becomes really important to come as soon as you know about it or as soon as you recognize. Another issue that I usually see is that people sometimes are so afraid to come forward. They're like, the whole what is gonna happen to me?

And with very nervous people, I always like to tell them, one, this you're not isolated. If this happened to me, I would be going through the same process. And I also make sure I get on a call with them. I think a call really eases that up. Another issue that I've seen is and this is more of a it's a rarer issue, but it is an issue nevertheless. Let's say um there's a certain geography or certain jurisdiction and the population is limited or the availability of niche skills is limited.

So quick story, let's say it's a hypothetical example of course. Let's say Jack and Jill are brother and sister. And both of them have very niche knowledge in a particular kind of reptile or animal, which can only be found in a certain geography. Both siblings are based out of there. The organization just looks at, you know, hiring someone else. One, there aren't too many people available in general, and it just isn't cost effective to have someone fly in there.

So ba by way of this arrangement, one of the siblings they'll probably take direction from the other sibling and they'll work in the field together. But they're siblings, right? And in a general um situation, this would be a conflict of interest. Or let's say the population is so small in a geography that everyone knows everyone. So when you're trying to hire a vendor or a supplier, there could be a pre existing close personal relationship. So how do you deal with that?

And another thing we see is relying on people bringing the conflict to you. So When you send out communications or when the ethics team sends out communications, typically that's when you see a rise in conflicts. But you're not going to be outlining every single scenario to every single employee in every single training. So it ties back to identifying

And also the relationship with stakeholder departments. So important to have a good relationship because you may be looped into a conflict situation through a different department. And in managing it, what's really worked is the visibility of the ethics team and when we act as a key business partner, which means that we will make things work when we can. So I think that's so, so important.

I mean we all tend to think, oh no, we don't have any, but in fact we do.

But then recognizing that if a potential conflict comes up, this has m more implications than just the team. It has implications more holistically. And that's why training is important. 'Cause it really helps us know and helps um enable people to actually think through this and this can get really convoluted, especially in huge organizations and huge companies. Some people are really aware Adam. They'll come uh to the ethics team and say

By way of example, hey, my spouse is working for the same company and don't worry though, we're in two different departments. It it doesn't really intercept. And that's great, right? Because sometimes conflicts can be more nuanced and just by them letting us know we can look at the nuances. For example, let's say one spouse is a financial analyst somewhere and another spouse in the same company is part of the admin.

On the face of it, never intersects. But does the admin spouse Do their responsibilities include expenses? And does the financial analysts' expenses fall under their purview? Aha. Then we have a little more of a conflict. So at that point some separation may be required. Now let's say both spouses are in finance, different departments.

And right now they're in different reporting lines, but could that change because of a promotion? So those nuances, um, that develops over time. And I really think it's important to train middle managers as well. to spot conflicts in their team because then that flows down more directly to

Um clear policies is absolutely where this starts off with. But like I said, everything cannot be covered by policy. You won't have every single scenario there. So if you have someone come and say, Oh, I don't think this is a conflict, is this part of the policy? It's to explain that yes, we have a policy, but every single nuance isn't covered.

And in training and communications, do the employees know that there's an ethics team? How do you reach the ethics team? And also employees have so much communications going out to them throughout the year. Where can you insert your ethics message? And what kind of messages? Are you sending out hypothetical examples so that they're more attuned to what conflicts can look like? So I think that's that's those are a few ways how you help people identify.

It comes to that extreme notice that uh the conflict is that Lee has its own business and a good portion of that business intersects with what the organization does. So the question is how is the ethics team going to approach this or how are you going to approach this as an ethics and compliance professional? Because you're on the same side as the business. You're looking to help them by looking at the risk caution. But they really want this person. So tensions can be running high.

So things absolutely not to do, I would say inflexibility. Sometimes when you're explaining the why of your recommendation and it and I always, always say get on a phone call Because once the person realizes the why, they're just like, Oh, actually I have this piece of information that I thought wasn't important, but is really important now. And that sometimes will make you step back and say, Oh, let me reconsider my evaluation.

Or let me reconsider parts of my evaluation. So being flexible is really important. And going into these meetings, thinking, we'll make this work when we can make this work. So not having an attitude of defensiveness or confrontation, but more an attitude of let's chat or let's talk about this. And also really understanding your organization of the because that's what you're trying to do. You're trying to be a key business partner. You're trying to protect

And also approachability. How approachable are you? Can can someone in the organization just give you a call or send you a quick email and say, hey, we have this going on? How quickly can you jump in?

And then you can flow down and see what is the risk appetite of that particular business unit or the department you're dealing with or that manager. So the risk appetite just flows down from the country down to the individual department or business line. Now when it comes to risk assumption, risk assumption is something who assumes the risk.

Do they know what the parameters are? Do they know the pros and cons? So knowing this, knowing this is so essential to actually coming up with solutions or mitigations to a conflict of interest. The second thing I'd really look at would be roles and responsibilities of the individuals involved.

And this is really important. Like we we spoke about Jack and Jill, right? The brother and sister, where they were just looking at a particular kind of reptile. What what are their roles and responsibilities? We spoke about the spouses. in different departments, the finance um and the financial analyst and the person in the admin department.

And we said, oh, what could happen if this overlaps at some point or where could a intersection happen? So really understanding the roles and responsibilities of the people involved in the actual or potential conflict. And then of course it's the mitigation plan itself, Adam, and the mitigation plan We're looking at something that's really, really clear. I remember one of my law school professors telling me

that anything you put out in your contract has to be clear. People need to understand what it is. And it's the same thing with the mitigation plan. How clear is your mitigation plan? We want it to be concise enough that it's not going into pages because we want to really have people read it and understand it. Um, we went back to

the the explaining the reason why. So being flexible in your mitigation plan, allowing the mitigation plan to be a living document. And by saying that I mean that you can change it according to changing circumstances. What if someone gets a promotion like we spoke about? How can you change the mitigation plan accordingly?

And of course, people reviewing it, getting that uh acceptance, filing it away. So that's more of a system or operational approach, but that's also important when you look at mitigation plans. Also, who is who has oversight over the Maybe the employee understands it, the manager understands it, but the right person needs to have oversight to make sure these mitigation plans are actually working in practice.

You know, sometimes we we can draft mitigations that look so so beautiful. So and I I I sometimes I I sometimes have to stop myself because I say, Oh, this looks so beautiful on paper. But does it really work well in practice? That's something we really need to cover. And at that point you're looking at the bigger So we also said sometimes that in companies, an individual or a manager, they're more focused on their business life. What what can they deliver? How efficient can they be?

And we also need to look at the bigger picture and not just a particular business line. So when you when you have a conflict come within a certain business line or department, explaining and also looking at it holistically from in terms of a whole company. And building relationships. I've always held that building relationships is so, so important.