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The Risk of Gifts and Entertainment

31/10/2016 - Risk Culture Risk Audit ERM

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As we approach the end of the calendar year, businesses grapple with the issue of giving and receiving gifts and entertainment to and from suppliers, customers and other stakeholders. This blog looks at the psychology of gift giving, the inherent risks in both giving and receiving gifts, and how the implementation of a ‘Gifts and Entertainment’ register can provide a defensible position if questioned about the probity of giving or receiving gifts.

The giving of gifts is ingrained across all cultures and societies. As an evolutionary trait, the act of giving a gift could be as old as humans. Individuals who generously gave would have more easily attracted a mate, and small gifts of food between members of a troop have been observed in our closest animal relatives, the chimpanzees.

For millennia, people have celebrated events such as births, deaths, weddings and other inter-tribal events – sometimes with extreme levels of gift giving. Often the act of giving lavish gifts was seen as a sign of success by a tribe, family or individual.


Governments and nations have also exchanged gifts as signs of peace and goodwill since ancient times. Examples include the pharaohs of Egypt who gave stone vessels with a royal monogram to their neighbours, the Hittites; a flock of birds given by King Richard the Lionhearted to a representative of Saladin in the middle ages; and most recently, gifts presented to royal families on the birth of children.

Gift giving has long been a favourite subject for studies on human behaviour, with psychologists, anthropologists, economists and marketers all weighing in. They have found that giving gifts is a surprisingly complex and important part of human interaction, helping to define relationships and strengthen bonds with family, friends and business connections. Interestingly, research appears to show that it is often the giver, rather than the recipient, who reaps the biggest psychological gains from a gift.

Receiving gifts in a business context is fraught with dangers. Consequently, many organisations have in place gift and entertainment policies that range from outright ‘no gifts allowed’ through to acceptance of gifts of high value in certain situationPresents- risk.jpgs.

The reason for these policies is straightforward: unacceptable reputational damage if the receipt of the gift can be perceived to be an inducement for favourable treatment to the giver. The ‘no gifts allowed’ policy can be seen as being a preventative control; the gifts register as being a detective control; and mechanisms such as ‘all gifts over a certain value are to be returned or donated to a charity’ as being corrective.

Establishment of Gifts and Entertainment registers has now become commonplace, and many Protecht.ERM clients have either created their own register or used Protecht’s template Gifts and Entertainment register within Protecht.ERM to capture information relating to gifts and entertainment, associated workflow for gift receipt approvals and /or subsequent action, and create policy compliance reports.

But what about the giving of gifts? This area is often overlooked by the gifts and entertainment policy and is often left within the context of business conduct guidelines – if at all. Just as the inappropriate receipt of a gift can be a risk to an organisation, the act of giving gifts can also be perceived in the wrong light if not handled appropriately. Several examples where things could go wrong come to mind: How does it look if the logistics team sends a ‘thank you’ gift to a trucking company while at the same time the finance team is in dispute due to non-payment of invoices to the same trucking company; or, small personalised gifts are sent to some clients while no gifts are sent to others – and we know that clients do talk to each other!

Using the Gifts and Entertainment register to track gift giving can also help mitigate the impact of reputational damage. Using the register to monitor contacts whose organisation does not allow acceptance of gifts, for example, can trigger workflow to advise the giver that a gift should not be given – and perhaps a personalised letter or card may be more appropriate. Where a client does accept gifts and entertainment, the register can include details of the likes / dislikes of recipients. Knowing this can ensure that the gift is aligned to both the receiver’s company policy as well as their individual tastes.

DON'T TOUCH GIFT.pngEllen J. Langer, a Harvard psychology professor has said, “If I don’t let you give me a gift, then I’m not encouraging you to think about me and think about things I like. I am preventing you from experiencing the joy of engaging in all those activities. You do people a disservice by not giving them the gift of giving.” In a business context, the questions that needs to be asked with each gift given or received is, “How appropriate is this gift for the context of the relationship?”; “Am I giving / receiving the gift as an inducement rather than a thank you?”; and “Would giving / receiving this gift cause reputational damage due to the nature or value of the gift?”.

Risks abound in the receiving and giving of gifts and entertainment. Don’t be caught out by not being able to monitor and track adherence to your own policies – and don’t cause potential embarrassment to your business connections by your act of giving.

For more information on how Protecht can assist you in establishing a Gifts and Entertainment register within Protecht.ERM, please send an email to info@protecht.com.au.


Read how Super Retail Group has generated significant performance increases at the customer coal face after rolling out Protecht.ERM. 

Case Study HERE

Super Retail Group Case Study

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