Risk Assessment on Business Ethics and Anti-Corruption

RISK ASSESSMENT ON BUSINESS ETHICS AND ANTI-CORRUPTION

Best practice governance guidelines suggest that an organization's governing body should ensure that ethics risks and opportunities are incorporated into the enterprise risk management process. However, to date most organizations have applied risk management and ethics risk management separately and as only somewhat complementary interventions. Since ethics risk is a dimension of risk that is on an equal footing with any other type of risk, it cannot be divorced from organizational risk. In fact, risk management and ethics risk management may be viewed as converging interventions that can be designed and implemented in an integrated manner.

Risk assessment consists of three steps:

Risk Identification

Risk Analysis

(including consideration of the sources and causes of a specific risk event occurring, consequences/impact of the risk event occurring, the likelihood that the risk event will occur, and the impact thereof on the organisation's objectives)

Risk Assessment

ANALYSIS & EVALUATION OF RISK

In analyzing the risk in terms of determining risk impact, the following impact- and likelihood risk scales are used by Lakshmi Green Ship Recyclers LLP as part of their risk grading methodology:

Impact assessment

Score	Level	Score
5	Catastrophic	Will result in the company closing down
4	Serious	Will result in loss of one year's revenue, loss of employee life, or serious reputational damage to the company (international news coverage)
3	Significant	Will result in loss of 6 months' revenue, serious injury to employees, or significant reputational damage (national news coverage)
2	Minor	Will result in loss of 3 months' revenue, minor injury to employees,or minor reputational damage (local news coverage)
1	None	No effect on the company

Likelihood

Score	Level	Score
5	Very likely	May occur every day
4	Likely	May occur several times a month
3	Possible	May occur several times a year
2	Rare	May occur once every 2 years
1	Unlikely	May occur once in 5 years or more

The table below represents the Risk Rating Heat Map (risk classification table), per the above methodology. The scoring is calculated as a mathematical multiplication of the impact and likelihood axes. For example, a risk-rated as Significant (3) in relation to impact and Likely in relation to likelihood, would be scored 12 (3 x 4). The heat map is calculated based on the premise that the organization has a three-level risk rating scale (High, Moderate, and Low), and that each risk category is equally distributed across the organization. Thus, the risk classification grading scale is based on the maximum risk score of 25 (per the table below), divided by 3, representing the three risk classification grading scales.

Topview of office desk with documents and laptop. Businesswoman working on paperwork.

Impact
5	Catastrophic	5	10	15	20	25
4	Serious	4	8	12	16	20
3	Significant	3	6	9	12	15
2	Minor	2	4	6	8	10
1	None	1	2	3	4	5
	Like hood	Unlikely	Rare	Possible	Likely	Very Likely
	Like hood	1	2	3	4	5

Risk rating	High	Moderate	Score
Classification	16.34 - 25	8.34 - 16.33	0 - 8.33

Using the above matrixes, the inherent risk of the identified perceived ethics risks that reflects the aggregate of the risk rating, the perceived impact, and the likelihood of occurrence.

#	Ethics risk	Risk rating (perceived)	Impact	Likelihood	Inherent risk	Current controls
1	Use of child labour	High	Serious	Likely	High	• Labour Policy • Vendor screening
2	Negative environmental impact of operations	High	Catastrophic	Very likely	High	• Internal environmental impact assessments
3	Operations threatening community safety	High	Significant	Possible	Moderate	• Health and Safety Forum
4	Theft of company property	High	Significant	Possible	Moderate	• CCTV surveillance • Body frisks at high-risk areas • Security guards at entry and exit points
5	Irregular procurement	High	Significant	Rare	Low	• Formal procurement process • Tender process for high-values pending • 3 quotations for lower-level spend
6	Favouritism in Minor Rare promotions	High	High	Minor	Rare	• Recruitment process • Panel interviews
7	Bullying of employees in the workplace	High	Significant	Rare	Low	None
8	Bribery of public officials by employees	High	Serious	Likely	High	• Anti-bribery and corruption policy
9	Employees committing fraud against the company	Moderate	Significant	Possible	Moderate	• Fraud policy • Whistle-blowing policy
10	Intentionally misleading stakeholders	Moderate	Serious	Unlikely	Low	• Corporate Communication • Liaison officer
11	Leaking of confidential information	Moderate	Serious	Rare	Low	• Document classification • Data leakage software controls
12	Sexual harassment	Moderate	Serious	Very likely	High	None noted
13	Illegal substance use	Moderate	Minor	Very likely	Moderate	• Employee Wellness Programme • Random illicit substance screening of employees
14	Inappropriate gifts and hospitality accepted by employees or given by the company to external stakeholders	Low	Minor	Very likely	Moderate	• Gifts Policy
15	Nepotism	Low	Minor	Rare	Low	• Recruitment process • Panel interviews
16	Extra-marital affairs amongst employees	Low	Minor	Likely	Low	None
17	Confiicts of interests	Low	Significant	Likely	Moderate	• Contractor screening