Understanding Conflict Of Interest In Businesses

Conflict of interest is a type of commercial fraud that is common between businesses and their employees. In the event of a conflict of interest, what will you do to safeguard your business?

What is a Conflict of Interest?

A conflict of interest occurs when an employee jeopardises the company’s operations, profits, or trade secrets for their own personal gain. Employees are bound by the company’s code of conduct to act in the best interests of their employer and such acts can cause trust issues between the employee and the business, create a hostile workplace environment, as well as cripple employee morale.

Many times, human resources departments will require new employees to sign an agreement stating that they understand the conflict of interest and agree to refrain from committing such acts, as well as report and disclose these acts if they are encountered. Anyone in a company can develop a conflict of interest. Whether you are an entry-level executive, senior management or a business partner, it is important that you act in the best interests of the business. Failing to do so may result in severe disciplinary consequences.

Some common conflicts of interest, including but not limited to:

Breach of employment contract
Starting and/or engaging in a competing business directly or indirectly
Syphoning of business
Failing to disclose that one is related to a job candidate the company is considering to hire
Hiring an unqualified relative or friend to provide services for the company, in favour of personal gain
Failing to report paid services to the company’s customer or supplier for personal gain
Working part-time at a competing company while still under full-time employment
Directly or indirectly engaging in a competing business
Poaching of staff
Sharing or selling confidential corporate information to a rival entity
Accepting consulting fees and providing advice to a rival entity for personal gain
Business contract bid-rigging
Provide favours to relatives and friends in hiring, promotion, procurement and subcontracting process, etc.

Scenario #1

A business partner of a local company A, established a rival business using a proxy (relative, friend, or ex-employee), without the knowledge of company A’s board of directors or business partners. He is the backbench person running the operations of the rival entity.

After the business was set up, he began stealing confidential information and trade secrets from company A and shared all the information with the rival business he has a stake in. Not only did he advise the proxy to adopt similar business models while syphoning business to the rival entity, but he also poached company A’s junior staff and had them resign consecutively to avoid detection.

When company A suspected a conflict of interest, they hired private investigators in Singapore to conduct an investigation into the matter to secure all the relevant evidence for civil litigation.

This was a case involving a breach of employment contract, starting and engaging in a competing business, syphoning of business, stealing confidential corporate information, and poaching of staff.

Scenario #2

A local company asked for a tender of uniform suppliers to provide uniforms for their staff. The procurement manager sourced three quotes, of which, one of the tenderers, company B, was actually run by her sister. The procurement manager also has a stake in the said entity.

The procurement manager then shared several confidential information with company B and her sister, including the bidding price and quote of the other two tenders. Eventually, the procurement manager awarded the contract to her sister and failed to report the conflict of interest to her company.

The company then launched investigation services with commercial private investigators in Singapore to gather and secure all relevant evidence to prove the relationship between the procurement manager and company B.

In this case, the conflict of interest lies in the sharing of confidential corporate information and awarding of contracts to an undisclosed family member for personal gain.

Conflict of interest is a serious problem that can put your company at significant risk. Every business, regardless of industry, is vulnerable to such challenges, which can lead to greater problems, such as reputation and revenue loss. Unfortunately, this cannot be entirely prevented. Businesses can only take precautionary measures to prevent such acts. Some precautionary measures include engaging investigation services to conduct exit interviews, streamlining your company’s standard operating procedures, or strengthening cybersecurity.

Do you suspect a potential case of conflict of interest in your business? CDiC Consultants is a private detective agency that provides investigation services related to commercial frauds in Singapore. Contact us for assistance.