Ethics and Compliance Risk Management in Business


Being a junior engineer working in the safety-testing group, the safety of the company as well as that of clients should be of utmost importance. It should therefore be a concern if tests of power consumption fail and threaten a fire hazard. In this case, where a large order has been delivered, an important decision has to be made. The decision might affect both the company and the client. Eventually, it might be a huge loss to the client, other users and the manufacturing company.

Risk management and ethics

Head (2005) says that risk management and ethics are interdependent. For a company to have good risk management, they should also practice good ethics. Good ethics also require equally good management of risk. Any organization that promotes unethical behavior by its employees or representatives does not practice good management of risk. On the other hand, a company that promotes poor risk management does not practice good ethics.

Risk management involves minimization of unpleasant effects of accidents or losses to the business. Ethics is a system of guiding principles which promotes appropriate behavior towards other people. Such guidelines include rules like honesty and transparency. In tough situations however, various ethical structures determine whether some action is ethical or not (Ethics and compliance risk management).

The case study gives an example of poor risk management and poor ethics. The supervisor is not concerned by the risk that the failed tests pose. This is also unethical as it involves dishonesty to a client.

Head adds that ethics reflect actions that protect others from harm. Risk management respects the rights of others like the right to safety especially regarding danger that can be prevented. The employees of an organization must be honest to their clients if they respect them. This also promotes the reputation of that company (Head 2005).

If a company’s senior management encourages dishonesty to the clients, they contribute in jeopardizing the company’s future. Defining ethics and risk of compliance requires that a company consider customer violations such as aiding and supporting illegal acts on customers thereby creating unsafe situations. It also concerns issues of products like failure of product safety.


The supervisor has a responsibility to protect the company’s clients from harm. His main concern seems to be the financial losses that the company will incur. The company could suffer greater loss if the client comes to any harm. The company’s reputation might also be damaged. Considering the risks involved, it would be wise to take action by repeating the tests. I would be honest to the client so that they and the company would be saved from the risks involved, even at the threat of losing my job. If the client discovered that there were some overlooked faults, the consequence would be greater than if the problem had been corrected in time. The company is likely to suffer huge financial loss if a problem occurred, possibly in compensation of damage and loss of clients. It is therefore wise to approach management and follow up on the mishap.


Head, George. 2005. “Why link risk management and ethics?

Ethics and compliance risk management.” Web.

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