Ethics

Of major importance to this treatise is the issue of ethics. There has been no code of ethics accepted by the risk management profession as yet. The literature and anecdotes are rife with stories of unethical tactics used by both brokers and buyers in the selection process. We believe the following guidelines need to be considered as part of the selection process.

1. Friendship may provide access, but should not have any impact on the actual selection.
2. Gifts of a material nature must be declined if there is any possibility (real or perceived) of their having impact on the selection process.
3. Quotes or information from one broker must not be shared with another prior to the selection. After the selection process is concluded, you many share the proposal as a method of contrasting their quality and/or content with the other broker's.
4. A broker selection process should not be used to replace an incumbent, hoping that the incumbent will not be successful. If the incumbent is not performing satisfactorily, the proper action is to correct the situation. If correction is not achieved or there is no improvement, the incumbent should not be included in the selection process.
5. The broker selection process should not be used to ratify a decision already made (i.e. the desire that one broker, perhaps the incumbent, be the winner and the selection process is "rigged" so the decision is validated). Competition for accounts is expensive for the participants and it is not ethical to use brokers in this way.
6. The servicing team at the brokerage firm must participate in preparation of the response to the RFP and be involved in the oral presentation. This will assure the prospective buyer the broker is prepared to service the account.
7. Further, "blue skying" or presenting unattainable program structures in conceptual presentation, when the broker knows the programs are not achievable, is not acceptable.
8. Low balling first-year brokerage fees with the clear intent of buying the business can be countered by requiring multi-year caps on fees and multi-year policies where available.

Source: Sloan Risk Management Services Ltd - Risk Management Newsletters No. 210
www.sloanrisk.co.nz