Why Financial Firms’ Ethics Gap Matters To Us All

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 In a statement launching the report, Ty Francis, LRN’s chief advisory officer, said the findings reinforced “the need for financial institutions to invest in ethical culture initiatives beyond the executive level.” That is putting it mildly. Either something is seriously wrong with the recruitment procedures and/or the training is inadequate. Whatever the cause, and it is hard to imagine that the extraordinary rewards still enjoyed by those running some financial institutions do not create something of a sense of entitlement, things — probably particularly in the area of incentives — need to change pretty quickly. As LRN points out, effective ethics and compliance programs are no longer just about mitigating risk, they are also fundamental to sustainable business success. That is crucial in any sector, but in the financial industry — as we have seen only too recently — it is especially so. https://www.forbes.com/sites/rogertrapp/2025/03/28/why-financial-firms-ethics-gap-matters-to-us-all/ 

Ethical Gaps in the Financial Services Sector: 2025 Ethics & Compliance Program Effectiveness Report. The new report examines data from LRN’s recent 2025 Ethics & Compliance Program Effectiveness survey, specifically isolating the data gathered from financial services organizations, uncovering critical shortfalls in ethical decision-making, measurement of ethical culture, and supply chain compliance—areas that demand urgent attention as financial firms navigate an increasingly complex regulatory and risk landscape. https://www.businesswire.com/news/home/20250326776246/en/LRN-Research-Reveals-Key-EC-Challenges-Shaping-the-Future-of-Financial-Services-Industry

Supply chains have endured plenty of pressure in recent years. From the lingering aftershocks of Covid-19 to the ongoing war in Ukraine, rising geopolitical tensions and climate-related disruptions, organisations are contending with a new era of volatility. At a recent Business Reporter dinner briefing at the House of Lords, hosted by LRN, senior leaders gathered to discuss how businesses can strengthen supply chains, mitigate risk and foster ethical resilience. https://www.business-reporter.co.uk/technology/the-expert-view-building-robust-supply-chains

From the House of Lords to Heathrow: Why operational resilience must start with the supply chain.  On March 20, my colleague Amy Hanan, Chief Marketing Officer at LRN, and I hosted a roundtable dinner event at the House of Lords in partnership with Business Reporter, bringing together 20 senior supply chain professionals to discuss one of the most pressing issues facing compliance and procurement leaders today: how to mitigate third-party risks and build true operational resilience.  And then, hours later, the real-world test arrived. This morning, March 21, Heathrow Airport faced widespread delays after a fire at a nearby electrical substation disrupted the airport’s power supply. https://lrn.com/blog/why-operational-resilience-must-start-with-the-supply-chain

Harvard Business Review: How to Approach Business Ethics as Global Consensus Breaks Down. 

Global consensus is breaking down on ethical issues such as anti-bribery enforcement and corporate responsibility. This moment is a call for leaders to face these challenging realities or risk potential financial and reputational damage to their businesses. There are three strategies leaders can use to navigate these ethical challenges—before it’s too late for their organizations: 1) Know your true values and pressure-test them; 2) embrace friction; and 3) “health check” expectations to drive ethical outcomes. By following these strategies, leaders can create constructive and healthy work environments that support ethical decision-making, even amid geopolitical risk and market volatility. https://lrn.com/blog/why-operational-resilience-must-start-with-the-supply-chain

Findings from The State of Board Effectiveness in 2025 by Board Intelligence highlight a major disconnect between the data boards receive and the insights they need. LRN’s 2025 Ethics & Compliance Program Effectiveness Report reinforces that high-performing compliance teams are already leveraging benchmarking and advanced analytics to meet these demands, while others risk falling behind, and the gap is getting bigger.  https://lrn.com/blog/bridging-the-compliance-gap-how-ec-leaders-can-deliver-better-insights-to-the-board?

Corporate compliance teams have to navigate internal challenges, such as perception gaps between different levels of seniority and between generations. At the same time, many companies’ compliance programs are failing to keep up with third-party and supply-chain risks – and the related regulatory requirements. These are among the findings of the 2025 Ethics & Compliance Program Effectiveness Report – Caught in the Middle, published by LRN. This article distills the study’s findings and includes insights provided to the Anti-Corruption Report by LRN chief advisory officer Ty Francis.  https://www.anti-corruption.com/21109251/2025lrn-effectiveness-survey-finds-lags-in-thirdparty-diligence.thtml

In her recent speech at the 10th Annual Culture and Conduct in Financial Services Summit, Emily Shepperd, COO of the UK’s Financial Conduct Authority (FCA), delivered a compelling message: culture is contagious. It’s a force that can either inoculate organizations against misconduct or expose them to reputational ruin. The FCA’s evolving regulatory framework emphasizes that fostering an ethical culture is not just about ticking compliance boxes, it’s central to maintaining market integrity and consumer trust. https://lrn.com/blog/the-contagion-of-culture-why-measuring-ethical-culture-is-essential-for-risk-mitigation

The Economic Crime and Corporate Transparency Act (ECCTA) represents a significant shift in the regulatory landscape for corporate compliance, aiming to address economic crime within the UK. Enacted in 2023, this law introduces new mandates that emphasize the responsibility of corporations to prevent fraudulent activities within their operations. The law’s centerpiece is the “failure to prevent fraud” offense, which sets a higher standard of accountability for companies to curb fraud perpetrated by employees or third-party agents. https://lrn.com/blog/eccta-and-its-impact-on-uk-and-us-companies-an-overview-with-the-fcpa-and-dojs-evaluation-of-corporate-compliance-programs

The U.S. Department of Justice’s recent signals to scale back enforcement of the Foreign Corrupt Practices Act (FCPA) have caught the attention of corporate compliance professionals worldwide. Under Attorney General Pam Bondi, the DOJ is shifting focus from corporate bribery to cases linked to human trafficking, narcotics, and violent crime. The disbanding of the Corporate Enforcement Unit and reduced oversight of export controls have further fueled speculation that white-collar enforcement is no longer a top priority in the U.S. : https://lrn.com/blog/while-the-us-may-look-to-relax-its-fcpa-focus-europe-will-be-watching

As we look towards 2025, the landscape of corporate ethics and compliance (E&C) will shift even more rapidly than we’ve seen this year, driven by the integration of artificial intelligence (AI) and shifting global regulations. The critical trends that will shape the future of E&C range from the risks and opportunities presented by AI, the growing focus on supply chain compliance made only more important with new legislation in the EU like CSDDD and new guidance from the Department of Justice’s (DOJ) Memo to its prosecutors, the role of leadership in fostering ethical cultures, and the complexities of navigating evolving ESG (Environmental, Social, and Governance) requirements in a less tolerant world. https://lrn.com/blog/ai-ethics-and-esg-in-2025

Boards are increasingly relying on quantitative data, such as corporate culture surveys, including metrics of employee turnover to assess corporate culture, moving away from subjective “gut checks” according to PwC’s recent 2024 Annual Corporate Directors Report.https://lrn.com/blog/boards-limiting-focus-on-esg-while-data-and-analytics-for-culture-measurement-continue-to-rise 

The food manufacturing industry has always been a highly competitive and risk-riddled industry. In a race to maintain productivity, reduce costs, and remain competitive, ensuring supply chain resilience is paramount. A crucial element of this resilience lies in effectively managing risks within third-party supplier relationships. Here we’ll explore practical approaches for monitoring supplier practices, the importance of ethics and compliance training, and the key risk indicators to watch for, aligning with recent regulatory guidance from around the world. https://lrn.com/blog/monitoring-third-party-supplier-practices-in-the-food-manufacturing-supply-chain

The recent lawsuit by Delta Airlines against CrowdStrike for over $500 million in damages following its widespread flight cancellations highlights just how critical the reliance on third-party technology suppliers has become. The July 2024 CrowdStrike incident, which disrupted operations across multiple sectors, including airlines, banking and healthcare, emphasizes how unregulated or unvetted third-party suppliers can pose substantial risks to business continuity. As the Financial Conduct Authority (FCA) reminds us, businesses must focus on mitigating such risks, particularly as firms increasingly rely on external technology providers. https://lrn.com/blog/the-importance-of-supply-chain-due-diligence-training-and-operational-resilience-lessons-from-the-doj-fca-and-the-crowdstrike-outage

In today's constantly changing workforce, ethics and compliance training must evolve to reflect the diverse perspectives and needs of multiple generations. As organizations strive to foster ethical cultures and reduce misconduct, a one-size-fits-all approach no longer suffices, especially with the growing presence of Generation Z (we define as being born between 1997 and 2012) in the workplace. As I travel to different cities around the world to talk about our 2024 LRN Code of Conduct Report, I’m constantly asked about how this younger generation is adapting to and using E&C resources. The data contained in this report echoes some research we released earlier this year in our LRN Benchmark of Ethical Culture Report. I firmly believe, leveraging insights from both of these papers, we can identify key trends to design more effective ethics and compliance (E&C) programs, particularly for Gen Z employees.  https://lrn.com/blog/tailoring-ethics-and-compliance-training-for-generation-z

https://complianceandethics.org/does-the-law-to-strengthen-business-integrity-go-far-enough-for-europes-largest-economy/

By Ty Francis, Executive Vice President at the Ethisphere Insitute.

Every business is looking for the edge that will help them outperform the competition, or trying to find the panacea for its performance woes. Today, that edge comes from driving an ethical culture across the organization. It’s something that all top-performing boards will need to address throughout the year. 

A number of high-profile troubles at major companies in recent months have highlighted what happens to a company as a result of a skewed culture. The scandal that came from Volkswagen’s emissions reporting fraud led to numerous investigations on how a bad culture leads to outright cheating at the company. At VW, these perceptions trickled down from the top, across the organization. With better board oversight, this culture likely could have been discovered and nipped in the bud before it became the scandal it is today. 

It’s worth noting that having an ethical culture is not just about risk mitigation, it also gives companies an edge. In fact, Ethisphere has found that share price of the publicly traded companies recognized as the 2016 World’s Most Ethical Companies consistently outperform other major indices, including performing 3.3% higher than the S&P 500 last year, and even greater outperformance as compared to the MSCI ACWI. Similarly, other research has found that portfolio managers today actively review a company’s governance practices when deciding whether or not to invest. Rivel Research for example has found that CSR is cited as an important investment driver by 22% of portfolio managers, a number that has steadily increased for the past few years. None of this can happen without clear leadership and engagement from the board and the rest of the executive committee. The message is clear: Boards must get involved in strengthening their companies’ culture if they want to stay ahead of the game.     

Main Article: http://www.equilar.com/pdf/c-suite/CSuiteInsight_vol2_issue20.pdf