Element 4: Professionalism and Ethics in Finance PDF

**Learning Objective 4.1 - Professional and ethical conduct which govern behaviour in finance workplaces** **The code of ethics finance professionals should consider:** - Compliance with the law - Acting with integrity - Treating suppliers, customers, partners and employees fairly and...

**Learning Objective 4.1 - Professional and ethical conduct which govern behaviour in finance workplaces** **The code of ethics finance professionals should consider:** - Compliance with the law - Acting with integrity - Treating suppliers, customers, partners and employees fairly and with respect - Contributing to a healthy and safe workplace - Respecting equality and diversity of the workforce - Maintaining high standards in their finance department. **Expectations of professional conduct, behaviours and attitudes, their purpose and value in a finance workplace:** - Respectful behaviour - Ethical decision making - Personal agency - Appropriate social interaction in different contexts - Sanctions for misconduct: warnings, fines and other financial penalties, suspension. **Whistle blowing =** **Positive vs Negative of Whistleblowing - Impact** **Learning Objective 4.2 - Ethical dilemmas in finance workplaces** - Reputational risk: the good name or reputation of a business is put at risk, because of the actions it does or does not take in relation to its activity - Process risk: failure to comply with internal controls - People risk: failure to obtain information about new employees such as knowledge, experience and qualifications o systems risk: failure to back up the computer systems, failure to put controls into access of the computer system - Legal risk: failure to comply with the obligations of a contract or not enforcing a contract, not enforcing compliance with regulations or changes in legislation - Event risks: external to the company and can include physical event risks such as fire or flood, social event risks such as not paying a living wage, political event risks such as a new political act introducing additional compliance, and economic event risks such as rising interest rates on borrowing - Risk of unethical behaviour; this can be reduced by ensuring a good code of ethics or code of conduct o individual employee risk; interpersonal relationships with co-workers may be impacted following a whistleblowing disclosure of unethical behaviour; the conflict between meeting challenging individual financial targets and selling practices - Selecting investments based on moral principles, money lending for cultural impact - Expectations of professional conduct, behaviour, attitudes and their value - Diligence in reviewing customer history, need to reveal full risk information when selling. **Learning Objective 4.3 - The importance of maintaining professional competence and professional scepticism in finance** **What are professional competencies, provide examples:** **What is professional Scepticism and provide some examples:** **Learning Objective 4.4 - Corporate responsibility and social purpose in finance businesses** Corporate Social Responsibility (CSR) = Ethical = Sustainability = **Task 1: Here you have the 3 main types of CSR. What initiatives do each of them involve? Work with a partner and brainstorm some ideas.** **Corporate social responsibility** **Task 2: Here you have a few CSR initiatives. Decide which category each of them belongs to (environmental, ethical or philanthropic).** 1. *employ people at risk of exclusion (e.g. people with disabilities, single mothers, unemployed people over the age of 45)* 2. *use less single-use plastics* 3. *produce less waste* 4. *fund education programs* 5. *increase reliance on renewable energy* 6. *offset negative impact (e.g. by funding research)* 7. *source materials that meet fair trade standards* 8. *donate to charities and non-profits* 9. *provide equal pay for equal work* 10. *disavow child labor* 11. *reduce greenhouse gas emissions* 12. *set higher minimum wage* *Which of the initiatives above would be especially interesting for a company to highlight as part of its CSR strategy?* **Advantages for a finance business of acting responsibly** **Implications for a finance business of acting responsibly** ------------------------------------------------------------- --------------------------------------------------------------- **Scope, Purpose, and Reporting of ESG Policies** **ESG** policies typically cover a wide range of environmental, social, and governance issues, including: - **Environmental:\ ** - Climate change mitigation and adaptation - Resource conservation - Pollution prevention and control - Waste management - Biodiversity conservation - **Social:\ ** - Labour rights and working conditions - Human rights - Community engagement and development - Diversity, equity, and inclusion - Consumer protection - **Governance:\ ** - Board diversity and independence - Executive compensation - Risk management - Anti-corruption and bribery - Ethical business practices **Purpose of ESG Policies** The primary purpose of ESG policies is to: - - - - - **Reporting of ESG Policies** ESG reporting is the process of disclosing a company\'s environmental, social, and governance performance. It involves collecting, analysing, and communicating information about a company\'s ESG activities and impacts. **ESG reporting can be done through:** - - - - By effectively implementing and reporting on ESG policies, companies can demonstrate their commitment to sustainability, build trust with stakeholders, and contribute to a more sustainable future. **Learning Objective 4.5 - The equality, diversity and inclusion requirements and their implementation in all areas of a business** **Businesses Must:** - Ensure employees and customers from a variety of backgrounds are actively welcomed and supported - comply with equality, diversity and inclusion legislation, policies and codes of practice in attitudes, actions and behaviours - make reasonable adjustments to support any individual needs - support vulnerable clients - Recognise and respect protected characteristics: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation - Avoid unconscious bias **Benefits of a Strong EDI Commitment:** - Improved Employee Morale and Productivity: A diverse and inclusive workplace can boost employee morale, engagement, and productivity. - Enhanced Reputation: A strong commitment to EDI can enhance an organisation\'s reputation and attract top talent. - Better Decision-Making: Diverse perspectives can lead to more innovative and effective decision-making. - Increased Customer Satisfaction: A diverse and inclusive organisation can better understand and meet the needs of a diverse customer base. **Equality Act:** -- -- -- -- **Human Rights Act:** -- -- -- -- **Task: Read the Barclays EDI Report and Summarise what they have implemented**  Discuss the impact on AB of operating ethically. (9) ***Positive impacts*** * Is the right thing to do* * They are committed to a CSR policy* * Provides good image and builds reputation, especially as a new bank* * Provides a competitive advantage over other banks* * Promotes equality and diversity* * Promotes fairness/respect/dignity* * Provides the value of cooperative practices and empathy* * Promotes a personal and collective responsibility* * Takes account of personal needs and requirements and the needs and requirements of others* * Supports the general principles of good practice in equality/access/inclusion/values, as well as obligations* * Raises awareness* * Creates an open culture* * Promoting good professional conduct resulting in long-term financial performance/ customer/ stakeholder value* * Operating in an ethical way to avoid financial crises* * Treating suppliers/customers/partners/employees fairly and with respect at all times* * Having ethical decision making by selecting investments based on moral principles / by lending money for cultural impact* * Having a warning to customers in relation to insufficient funds* * Will attract more customers to use the banking and savings apps* * Ethical practices tend to be attractive to potential customers, increasing the numbers opening accounts and the revenues earned* * Investors may be attracted by ethical practices* ***Negative impacts*** * The recruitment and selection process may take longer in order to ensure equal opportunities* * Fintech requires cybersecurity which needs managing, costing money for both software and staffing* * Each debit and credit card may cost more to manufacture / purchase* * Sponsoring the community project will cost money and many of those involved in the project will not be able to be customers for some time due to their young age* * Profitability may be impacted as ethical practices tend to be more costly than non-ethical practices*