Business Ethics In The Financial Sector †MyAssignmenthelp.com

Question: Discuss about the Business Ethics In The Financial Sector. Answer: Introduction Every economy has a lifeline known as the financial sector. However, this sector is marred with a lot of issues ranging from scams in security, scandals in IPO, insider trading and churning to window dressing, agency problems in the group of corporates and greenmail (Dufrene Wong 2016). The issue of responsibility in the financial sector is not only a matter of private ethics but also entails the establishment and the maintenance of trust bonds between the capital users and the holders, and also amongst the operators. In insurance and banking, there is a surge in complexity and ethics has become not a choice between what is right and wrong but it involves having the zeal to confront ethical dilemmas during the course of the business. Therefore, this discourse seeks to explain the ethical issues in this sector, establish the sustainability focus, identify the factors that drive this sector in managing ethics and finally how ethics have helped propel the financial sector to a better c ourse. Sector Analysis The scandals in the finance sector and security scams have been available allover many economies and the back lies with ethics. Additionally, the financial markets that have advanced legal systems and authority of regulation have still undergone ethical problems. Some of these areas include the IPOs and fabrications. IPO scams are rampant in the financial sector since players play around with them to establish a ground for firm ownership (Dufrene Wong 2016). The operators in the IPO sector usually open accounts that are fake in a bid to purchase IPO equities and later sell them at prices that are hiked. As such, these scammers engage in spates of subscriptions for the ownership of IPO shares (Dufrene Wong 2016). An examples of a nation that has suffered this ordeal is India. Some of the major companies involved in this unethical practice were IndiaBulls Securities and also Karvy under Panchal and Sugandh. Another major challenge in the sector is the software problems and fabrications. Some of the software issues arise due to poor internet security issues and firewall protections (Staubus 2013). For instance, the most recent ransomware attack on computers and financial firms demanded an immediate action that was not realized whatsoever. Additionally, fraudulent bankers install software that hikes prices such a withdrawal and cash transfer charges. As such, banks enjoy undue profits from their customers. This same problem is harbored in the insurance sector and other companies in the financial facet. The other challenge affecting this sector is the securities and the premium scams where insurance companies and other firms hike the prices of their shares and premiums to steal from their customers (Staubus 2013). For instance, a company inflates its shares on the stock markets to siphon a lot of cash from the purchasers and then later the prices come down to the level at which they were bought before. This comes as a surprise to the buyers and because no one forced them to buy the shares, sufficient evidence is hard to come by in a bid to seek justice (Ethics in Finance 2015). The sustainability focus in the financial sector is inclined towards the responsible investing, social entrepreneurship, focus on renewable energy and management of risks. For instance, the Australian society has focused on the United Nations initiative to foster renewable and green energy to champion a pollution-free environment. In this regard, the financial sector has heavily invested in ensuring that this move gets a head start to promote an improved social service delivery as well as a clean and habitable environment (Olanrewaju, Aremo Aiyegbusi 2015). The major stakeholders in the financial sector includes the bankers, insurers, normal business accountants, small and middle income enterprises, companies in almost all economic sectors among others. In this regard, it is imperative to note that the major players are the bankers and insurers. Banks are key in the storage of finances and dissemination of loans to various players. Additionally, the stock exchange markets are equally vital in the financial sector because it acts as the lifeline of many businesses which attract investors who buy shares. Moreover, the stock exchange markets also invite many financial scams because vulnerability of customers is very high. These stakeholders, therefore, carry the mantle of the financial sector. There are various factors that are driving the financial sector to effectively manage ethics. Some of them includes the embodiment and cultural change, codifications around the sector, education, adjudication and monitoring, functions of compliance among others. Cultural change entails the continuous awareness that the society has as far as ethical conduct is concerned. People know that ethics need to be mainstreamed from the top of the organization to the bottom no matter what the scenarios may be. Furthermore, the federal as well as state laws provide for guidelines which outline the measures an individual may explore if an unethical scenario occurs in the financial sector. The cultural change responsibility cannot be divided or delegated into divisions of risk or compliance but needs to be a holistic approach and firms have realized that everyone knows their rights. Therefore, there is no shortcut from an ethical behavior. Financial boards need to comprehend the need for ethical policies and commit themselves to ensuring that effectiveness is realized. Codification is all about an established code of conduct that must be adhered to. Most of the financial institutions possess an ethical code that mandates each and every employee to follow strictly. As such, firms have no choice but to adhere to the provisions in their industry (Staubus 2013). As the law also requires, firms are supposed to regularly review their codes and establish whether; consumers are protected as opposed to shareholders only and must be in a meaningful and honest way, possesses a straightforward guidance that is practical and easy to follow, stretches beyond the financial law requirements of Australia and other parts of the world (Small 2015). Clearly, firms also strive to strike a balance between the details that are prescribed in a code of ethics and the statements that are of a high level. As such, financial firms have gotten this concept right and are gearing towards adherence to the ethical codes. Another factor is the education that most stakeholders have undertaken to smell where the rot is. Financial institutions are committed to training their employees on matters of ethics and they do it regularly. Moreover, most of the educational institutions have ethics as a unit in the courses so that the learners get familiar with the ethical purview. Considering this development, the society has been infused through a sense of ethical sensitivity. These people are flocking the financial institutions and their newer ideas on ethics are put in practice. As such, the sector has realized tremendous changes. Scholars say that there is difficulty in changing the way of peoples thoughts and actions, but education is able to do that (Small 2015). Moreover, firms have learned from the previous mistakes and new measures have been put in place to eradicate the problems (Staubus 2013). Adjudication and monitoring entails people being on the look and firms have established policing systems which ensure that their employees adhere to ethical behavior. Moreover, there are regulatory bodies that monitor the operation of financial institutions and any breach of protocol attracts heavy penalties and termination of institutions. As such, there is no choice but to divert to ethical practice (Trevino Weaver 2014). Themanagement of business ethics has been instrumental in promoting various aspects in the financial sector. Additionally, the factor of corporate social responsibility has improved in the recent times on the globe (Olanrewaju, Aremo Aiyegbusi 2015). The financial sector has attracted more customers and stakeholders due to ethical behavior. Additionally, the financial sector has seen less turnover rates because of employee satisfaction. For example, the Commonwealth Bank in Australia has some of the lowest turnover rates due to its ethical standards (Why Ethics In Finance Matters?. 2014). The Australian financial sector has seen an upsurge in the investor numbers because of its best regulatory agencies and low rates of financial fraud resulting from unethical stakeholders. It is noted that Australia is ahead of most of the Asian nations such as India, China, Taiwan and others in the financial transparency levels. Additionally, an ethical sector attracts more foreign investors who then champion economic growth. The leadership and the stakeholders in the financial sector are united because of ethics. Moreover, there is an improvement in the sectors decision making and a lot of gains in the long run. Furthermore, the society is secured through financial security and improvement (Olanrewaju, Aremo Aiyegbusi 2015). In conclusion, ethics are an important aspect that anchors the financial sector to the course of economic importance. The discourse majored on the challenges in the sector, the effectivemanagement drivers in ethics and the benefits of ethics in this area. Data from various journals and economic accounts was useful in establishing and effecting this topic. Some of the challenges identified include fraud in IPOs, securities and software insecurities and dishonesty. Sustainability of the sector is established on green energy, transparency,risk management and entrepreneurship in the society. Drivers for ethical behavior includes education, codification, constant surveillance, learning from past mistakes among others. The stakeholders are bankers, insurers and SMEs. Some of the limitations of the study are; lack of honest responses from stakeholders and insufficient evidence-based accounts thus insufficient data particularly from Australia. Lastly, it is imperative to note that the financial sector is sensitive and the nitty gritty information is not wholly captured. References Dufrene, U. and Wong, A. (2016). Stakeholders Versus Stockholders and Financial Ethics: Ethics to Whom?. Managerial Finance, 22(4), pp.1-10. Ethics in Finance. (2015). Business Ethics: A European Review, 5(3), pp.178-180. Olanrewaju, O., Aremo, A. and Aiyegbusi, O. (2015). Banking sector reforms and output growth of manufacturing sector in Nigeria (1970-2011). Journal of Economics and International Finance, 7(8), pp.183-191. Small, M. (2015). Business ethics and commercial morality in Western Australia. Journal of Business Ethics, [online] 14(4), pp.279-285. Available at: Staubus, G. (2013). Ethics Failures in Corporate Financial Reporting. Journal of Business Ethics, 57(1), pp.5-15. Trevino, L. and Weaver, G. (2014). Business Ethics/Business Ethics: One Field or Two?. Business Ethics Quarterly, 4(2), p.113 Why Ethics In Finance Matters?. (2014). Finance Bien Commun, [online] 27(2), p.52.