In Conduct Risk: A Practitioner’s Guide, published by Risk Books of London (2016), I argued that conduct risk is most simply defined as institutional behavior that can result in poor outcomes, and that conduct risk lurks in one of the four dimensions of operational risk (people, processes, systems, external events). In both the public and private sectors, people are at the heart of conduct risk. Misconduct can result in reputational, military, or financial loss. When it comes to the nation’s critical infrastructure, outcomes are felt by the government, non-government institutions (NGOs), and private industry. The essays in the conduct risk volume all deal with aspects of conduct risk. I was asked to write about its root causes, and I identified three: tone at the top, workplace culture, and conflicts of interest.
There is no doubt that the Trump administration has destabilized our country with changes they have designed and executed across the executive branch with a multitude of executive orders. His Supreme Court nominees, now seated, usually write majority opinions that favor the executive branch. Congress has been ineffectual in every respect, with a fair amount of Republican fear of Trump’s late-night social media postings, and a growing desire to separate individual voting records from Trump because of a rising number of instances where the administration has not been able to achieve its goals, especially in the areas of inflation and warmongering. His handpicked cabinet reflects the culture he has cultivated in this second term, which in turn reflects the culture that shaped him.
What’s attributable to conduct? A high-level review of the three root causes of conduct risk, with reference to both the administration and to the private sector, is in order.
The first root cause is the greatest: tone at the top means setting the theme, the values, and the behavior that leaders expect from their executives, managers, and workforce. If the organization's leadership models ethics and integrity, employees will generally follow the example they observe. In this second term, Trump has worked hard to rewrite history, whether in a museum or at a rally, or even on his website. You can be sure that members of the cabinet are all singing the same song, and we see how Congress tries to toe the line and talk the talk as well.
The second root cause of conduct risk is workplace culture. Here, the Trump strategy has been to eliminate the cultural mismatch between long-term government employees and presidential political appointees by first terminating the professionals and, at the same time, reducing budgets and oversight. Examples abound of the work of DOGE, the pressure to remove DEI grants, language, and projects at colleges, universities, and cultural repositories like museums and the Library of Congress – and to launch an aggressive campaign against the free press, meant to draw our attention away from other workplace culture and managerial changes going on at, for example, the Department of Defense. The deterioration of tone at the top has even led Trump to give Pete Hegseth nearly unlimited power over personnel decisions and budget spending, setting the tone for firing squads.
The third root cause is conflicts of interest, which are directly related to the first two causes. The Oxford English Dictionary defines a conflict of interest as “A situation in which a person is in a position to derive personal benefit from actions or decisions made in their official capacity.” His family has grown richer through deals handled by members of his family, whether it’s himself (Trump memorabilia), Jared Kushner (Gaza-Israeli conflict), or Donald Trump Jr. (crypto exchanges and policy), or the use of the Department of Justice as revenge against former government servants like Anthony Fauci or James Comey.
As we move toward the midterm elections, the literal costs of bad judgment loom large as they affect citizens’ lives – the best examples of interconnected spiraling costs are the price of gasoline and the burden it places on military deployment and the costs of weapons and infrastructure, as well as the supply chain ramifications for moving goods and services with punitive tariffs on historical international partners, Mexico and Canada in particular. One would hope there is a plan to shut down the wars in Ukraine-Russia and in Iran as we push the debt limit up higher, but this administration has shown little inclination to do so.
We must understand that misconduct has real consequences and find ways to demonstrate the enduring value of personal and institutional integrity. In another chapter of the conduct risk book, Elizabeth Sheedy notes that “Most learn how to behave by observing what others do rather than by reading procedures manuals, policies, and value statements” (Sheedy, Chapter 6, p. 126). We lack good models right now for doing what is right. An obvious step toward better outcomes lies in the power of the vote. All is not lost if citizens step up to vote and to ensure votes are not only cast, but counted.