By DEREK SMITH

In today’s rapidly-evolving regulatory environment, governance, risk and compliance (GRC) play a critical role in shaping operational integrity, especially in industries such as telecommunications and banking. Given their reliance on data, trust and global interconnection, these sectors face unique ethical dilemmas.

As this writer prepares to address the topic, ‘Ethical leadership and governance’, at the annual conference staged by the Institute of Internal Auditors’ Bahamas Chapter, this article examines three key challenges: Accountability, integrity and leadership, providing insights into how management executives and corporate leaders can navigate them.

Accountability in Governance

Accountability is essential in governance, risk and compliance. But when the lines blur, what happens? This is a common ethical dilemma, especially in multinational financial institutions and large telecommunications providers. Accountability is often displaced when reporting structures are unclear or internal controls are inadequate. According to a study by the Chartered Institute for Securities & Investment (CISI), lack of accountability is a primary factor in major financial collapses. And the New York Times reported in March 2021: “Credit Suisse suffered humiliation and shareholder wrath this year when it lost $5.5bn from the collapse of the Archegos Capital Management investment fund”.

Integrity in Risk Management

Risk management relies on integrity. However, maintaining it in the face of commercial pressures, especially in high-stakes sectors such as telecommunications and finance, presents a substantial ethical dilemma. Compliance officers often find themselves balancing the demands of regulatory requirements against the drive for profitability, which can result in risky behaviour.

A notable example is the 2020 case involving Deutsche Telekom, which faced scrutiny over data privacy concerns. The telecommunications giant was accused of prioritising commercial interests over customer privacy, raising questions about the integrity of its risk management practices. Ethical risk management is not just about adhering to regulations but also ensuring that business decisions are made transparently and with a commitment to fairness.

In The Compliance Blueprint, this writer wrote: “True integrity is not tested when everything is running smoothly; it’s in moments of conflict between profitability and ethical practice, where the strength of a company’s governance, risk and compliance framework is truly revealed.” Leaders in governance, risk and compliance roles must be vigilant, ensuring that integrity is non-negotiable even when it may hinder short-term gains.

Leadership’s Role in Ethical Governance

Corporate leadership plays a pivotal role in establishing and upholding ethical standards in governance. Management executives, especially in sectors such as banking, where public trust is fragile, are under constant scrutiny. A significant ethical dilemma arises when leaders either fail to model ethical behaviour or are themselves embroiled in unethical practices.

Strong leadership requires more than just technical knowledge; it requires a deep commitment to ethical practices. Effective leaders foster a culture where compliance is not seen as an obstacle but as an integral part of business strategy. Leadership in governance, risk and compliance is about setting the tone from the top. A company’s ethical foundation crumbles when leadership fails to demonstrate consistent, transparent behaviour.

Conclusion

The telecommunications and banking sectors must continuously navigate ethical dilemmas in governance, risk and compliance. Top executives and corporate leadership are critical in ensuring that accountability, integrity and strong ethical leadership are not just buzzwords but foundational elements of their company’s governance, risk and compliance frameworks. A culture where ethical practices are woven into decision-making can protect companies from both financial and reputational damage by addressing ethical dilemmas. Sustainable, long-term success depends on leaders embracing this responsibility.

• NB: About Derek Smith Jr

Derek Smith Jr. has been a governance, risk, and compliance professional for more than 20 years with leadership, innovation, and mentorship record. He is the author of ‘The Compliance Blueprint’. Mr Smith is a Certified Anti-Money Laundering Specialist (CAMS) and the Assistant Vice President, Compliance and MLRO for CG Atlantic’s family of companies (member of Coralisle Group Ltd.) for The Bahamas, St Vincent & The Grenadines, St Lucia and Curaçao.