A Valuable Practice

Kate McGinn XL Insurance — Environmental www.xlinsurance.com Exton, Pa.

MANY COMPANIES HAVE INVESTED time and money to comply with financial reporting and internal control requirements placed on them by landmark legislation such as the Sarbanes-Oxley Act of 2002, which is designed to reduce corporate fraud. Under the legislation, risk management has become very real. However, reviewing internal processes and controls is only the tip of the iceberg in evaluating risks.

When corporate abuse occurs, processes to prevent the abuse may have been nonexistent or failed. Yet executive misbehavior arises from bad judgment or a lapse in integrity. This is what leads to the manipulation of company resources and deception of company stakeholders.

Thus, in addition to taking a broad approach to risk management, many companies are delving deeper. They are examining the inner core of their businesses — what they stand for and how they operate.

Effective risk management relies heavily on values. It often requires making the “right” decisions for the client without losing sight of what's best for the firm. Questionable business practices, such as fudging results, ignoring safety concerns or unfairly treating employees or clients, can leave companies vulnerable to losses. Losses could include losing clients, a poor reputation, or facing an insurance claim or other loss that occurs when court action is taken.

For many waste companies, values include platitudes about customers, environmental stewardship, respect for employees, integrity, honesty, appreciation and communication.

The trick is to ensure that values are not just words on a wall but are infused into workforce operations.

Consider the value of open communication. Breakdowns in the communication of job expectations, or the lack of established procedures, can leave a company vulnerable. It could mean an unqualified person is told to do a task, which could lead to an injury or accident.

Two-way feedback is another facet of communication. Feedback can encourage good behavior and motivate a team. On the other hand, if employees make mistakes, constructive feedback can get workers back on track. This type of communication can ensure that behavior is corrected and mistakes are not repeated.

Customer relationships also rely on effective communication. Promptly returning phone calls, for example, can instantly impress clients. Responsive communication helps build trust that can be advantageous if problems arise.

There are many steps companies can take to clearly define values and set realistic expectations about how values can be instilled into a firm:

Living by a strong set of values is not easy in today's profit-driven world. When corporate values are practiced, however, it can result in financial and nonfinancial rewards for businesses. These rewards can include stronger customer relationships, lower employee turnover and fewer insurance claims or contract disputes.