BOSTON--An operation's focus on ethics is of critical importance in an era of increased disclosure requirements and corporate scrutiny after Enron and other scandals, an expert advised public sector risk managers meeting here.

That counsel came from Tris Felix, risk manager with IMA Financial Group of Kansas Inc., in Wichita, Kan., speaking at a session of the Public Risk Management Association's annual conference.

Mr. Felix said risk managers of public entities, charged with the public's trust, have an added duty to be vigilant.

"How do we know we are being ethical?" he asked, noting that a good indicator is whether the mission and guidelines of an organization are being fulfilled. Another gauge, he said, is whether or not there are conflicts of interest.

Mr. Felix said that although cell phones, computers and e-mail have drastically transformed our lives, "the core fundamentals of business ethics" have remained constant, "and that's why they're important."

He pointed out that ethics concern a code of behavior, which comes up every day and in many situations. Moral dilemmas, however, are "right versus wrong." For example, he said, investigations by then New York Attorney General Eliot Spitzer into brokers and insurers' bid-rigging concerned moral judgments being made.

And while it may not be "illegal for brokers to take contingencies," he added, the question is whether taking them is ethical. An ethical dilemma, he said, is a narrower subset of a moral dilemma, adding that the ethical guidelines of today become tomorrow's laws.

Making the right moral decision "feels right," he said, because we make moral decisions based on what we were taught as children. In other words, ethics come "from the head," while morals are "from the heart."

Ethics will always be challenged. For example, "you may be asked to make some critical decisions," such as cutting a budget, cutting a staff person or cutting an organization's safety training. "What do you do?" he asked. "It's going to happen."

There are three general categories for ethics guidelines, he said.

o A situation-based code, where a decision is made based on a desired outcome. However, he cautioned, "if that's your strict ethical decision-making, there will be inconsistencies."

o A rule-based code is determined by procedures followed to the letter. While this may be better than a situation-based code, he said, "are the rules sufficient to identify conflicts of interest that might be present?"

o People-based guidelines, he explained, are based on following the golden rule--do unto others as you would have them do unto you. While this is "a pretty good rule to live by," he said, "there can be some inconsistencies there."

He added that a blend of people-based and rule-based codes may be the most ideal combination.

Why are ethics important? Because they "provide that course during turbulent times," he said. Ethics are "our rock, our foundation. So, when we have those times of change, we're able to rely on our ethics."

Ethics also instill reliability and efficiency in business, which cultivates teamwork and productivity. In addition, individual and professional growth goes hand-in-hand with ethics. They also help us "stay legal," he said.

Mr. Felix said that for public entity risk managers charged with spending tax dollars, a strong moral code helps "promote a strong public entity. And it preserves the trust of public funds, which is necessary. And that's one of the core principles of PRIMA."

He said that public risk managers need to cultivate a code of conduct that includes putting constituents' interests first; improving their professional skills and knowledge; maintaining a professional level of conduct with business associates; and avoiding participation in any activities which could lead to a conflict of interest.

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