Define ethical risk and suggest mitigations within business operations.

• A. The probability of unethical conduct harming stakeholders or performance; mitigated by governance controls, training, whistleblower channels, and audits
• B. Ethical risk is only about legal compliance
• C. Ethical risk can be completely eliminated through marketing
• D. Mitigations include avoiding audits and ignoring whistleblowers

Answer: (A)

Ethical risk is the probability that unethical conduct by people within or around the business will harm stakeholders or overall performance. The best option captures this definition and offers practical ways to address it: governance controls establish clear policies and oversight, training builds awareness and reinforces expected behaviors, whistleblower channels provide safe reporting and protection, and audits offer independent checks to detect and correct issues. Together, these mitigations create a system that prevents unethical behavior, detects problems early, and demonstrates accountability, helping the organization protect its stakeholders and performance.

Why the other choices don’t fit: ethical risk involves more than just legal compliance; it encompasses reputational and operational harm that can occur even when laws are followed. Marketing alone cannot eliminate ethical risk because it does not change internal practices or governance structures. Avoiding audits and ignoring whistleblowers would leave issues hidden and unaddressed, increasing the likelihood of harm and undermining trust.