Question

the financial crisis of 2008 hit as a result of careless and unethical behaviour in finance sector. Evaluate the concept of business ethics

Answer 1

Solution:-

The financial crisis of 2008 hit as a result of careless and unethical behaviour in the finance sector. The effects of this crisis have been far reaching both socially and economically.
As the true impact of the crisis became apparent we at CIMA recognised that in order to repair and secure future growth there needed to be an understanding of why it happened, rather than solely punishing those responsible. With this in mind we carried out our first piece of research into ethics in business.

Roll forward to 2015 and our third ‘Managing Responsible Business’ report, and businesses across the world are still experiencing some of the same issues. Much has improved, but more improvement is still needed. Once you have qualified as a finance professional you will have a great role to play in helping your companies develop strong business ethics and manage their business responsibly. To achieve success in this area what business ethics are must be understood, as well as what makes a responsible business.
Business ethics are sometimes referred to as business principles, but they boil down to the same thing. They are the application of values such as integrity, fairness, respect and openness to organisational behaviour; applied in all areas of the business especially during day-to-day operations.
A responsible business is committed to operating in a way that is economically, socially and environmentally sustainable. It also means ensuring this commitment prevails while still upholding the interests of various stakeholders.
Upholding both these elements of good business culture is sometimes difficult in the face of what feels like intense pressure from senior managers and stakeholders to deliver success. Our latest Managing Responsible Business report takes a global look at how well businesses are doing at creating an ethical culture in the workplace and how they respond to corporate challenges such as cyber-security, corruption, human rights abuses – all of which can have a huge impact on the financial performance and reputation of a business.
In 2012, 80% of companies said they had a code of ethics, an increase from 72% in 2008. Now in 2015 that number has risen to 82% (93% in larger organisations). Despite this, in the UK, for example, 30% of those who responded to our survey admitted to feeling pressure from their managers or colleagues to compromise their ethical standards. This has risen from 18% in 2012.
Although the figures are concerning, finance professionals have a duty to respond to these pressures
with an ethical solution. Management accountants, with their unique blend of skills, should be able to identify ways to achieve the goals of the business without compromising their professional ethical standards or the standards of their organisation. This is when your Code of Ethics comes in to play; use it as a support and framework for your entire decision-making process and remind senior managers and business leaders of your duty to uphold it.
There is a growing demand for ethical management information, which allows an organisation to assess its ethical performance – yet 90% of organisations say they struggle to get valuable insight from it.
Our research shows that 80% of management accountants recognise they have a role in managing ethical performance within their organisation. It also showed who most frequently asked them to provide this information. Investors came top of the list of external stakeholders who request this data and senior managers the highest internal users of this data. The gap between the demand for EMI and the understanding of how to use the information to help implement structures and policies is clearly illustrated in these figures. However, this also points to some room for finance professionals to own this area in the future and to help senior managers and business leaders to understand how they can meet targets and satisfy the need for continued growth.
Finally, although our research shows that there are still a lot of issues to address, there is plenty of good news, too. The number of businesses implementing ‘ethical architecture’ (such as hotlines where staff can report their concerns) has increased rising from 49% in 2011 to 59%.
There has also been an increase in businesses giving their staff incentives to uphold their organisation’s Code of Ethics from 25% to 46% in the past three years. This can only be a good thing as it starts to bring the idea of business ethics into the employee’s day-to-day decisions. A more ethical business culture is not something that can be achieved by working in silos. So to make sure we continue to see improvements show your commitment and demand the same level from your employer.

$Please \:\mathfrak{{\color{Red} Rate}}\: or\: comment\: if\: you\: have\: any\: doubt\: regarding\: this \: solution$