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Why it’s important to know about employee business interests

Most people could do with some additional income to help offset the stress of life’s many expenses. While it may be completely acceptable to have a second income in these tough economic times, it is up to employers to ensure their permanent employees are not conflicted in any way that could cause harm to the business. 

Rudi Kruger, General Manager at LexisNexis Data Services, said employees have a legal and ethical obligation to serve in the best interests of their employers. However, in some cases, these second income streams are risky and create opportunity for unethical behaviour, conflicts of interest and other illegal activities in a bid for employees to line their pockets.

“Earning more through a second income might seem like a reasonable and ethical way for employees to boost income, but not when it stands to negatively impact their primary employer. We must acknowledge that the fragile economy heightens the risk,” he said.

“It is therefore important for companies, that are serious about protecting themselves, to take the necessary precautions that would ensure employees are not involved in income opportunities that contrast or jeopardise the interests of the business,” Kruger added.

In cases where employees have personal business interests elsewhere, there is a heightened risk of them making decisions that influence your business, administrative or other material decisions in a manner that leads to personal gain or advantage.

This could be by them approaching customers or prospective customers with a view of doing business with them in their own capacity, or they could also be working for a competitor in a contending capacity, or trying to set up a competitive business with the intention of taking staff and insider knowledge with them to other ventures.

With regard to procurement, bribery and corruption in supply chain are red-flag risk factors especially during tough economic conditions. Employees are at risk of participating in deliberations or actions resulting in the purchase of goods or services from any organisation in which an employee or his or her family member stands to gain from.

Despite measures like conflict of interest clauses within employment contracts, employers need pro-active measures and ongoing internal controls if they want keep on top of their employees’ business activities. This can be achieved through proper and regular employee screening with the right tools. One such tool is Lexis®ProcureCheck, a supplier and employee vetting solution from LexisNexis Data Services.

The solution can be used to identify conflicted employees and suspicious suppliers. The solution assists with procurement vetting and vendor management and facilitates the verification of various data sets, providing linkage to identify possible conflicts of interest, pass-through schemes and shell companies. It also enables users to investigate negative and positive news on vendors and employees to assist in mitigating reputational risk. 

For more information, visit https://www.lexisnexis.co.za/lexisprocurecheck