Niyati Ahuja sits down with Kasturi Venkatesh, currently senior consultant for ethics and compliance at WSP USA, to discuss the complexities of conflicts of interest in professional settings. This episode examines the distinctions between real, potential and apparent conflicts, and how these issues can impact organizational trust and integrity. Listeners will gain actionable strategies for navigating ethical dilemmas and mitigating risks with transparency and fairness.
Niyati Ahuja sits down with Kasturi Venkatesh, currently senior consultant for ethics and compliance at WSP USA, to discuss the complexities of conflicts of interest in professional settings. This episode examines the distinctions between real, potential and apparent conflicts, and how these issues can impact organizational trust and integrity. Listeners will gain actionable strategies for navigating ethical dilemmas and mitigating risks with transparency and fairness.
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Transcript:
Intro: Welcome to Disputes in Perspective, a Reed Smith podcast. This podcast series will discuss disputes-related trends, hot topics, and developments occurring in the global legal landscape, and hopefully provide you with some helpful insights and practical tips. If you have any questions about any of the episodes, please feel free to contact our speakers.
Niyati: Welcome to Reed Smith's Disputes in Perspective podcast. I'm Niyati Ahuja, a senior associate in the Global Commercial Disputes and International Arbitration Group in New York. I'm dual-qualified in New York and India. My practice involves international arbitration, both commercial and investor state, litigation in New York courts, and some white-collar investigation. Today we have Kasturi Venkatesh with us. Kasturi is currently a senior consultant, ethics and compliance at WSB. Kasturi holds three degrees in law and has worked in compliance across different industries, including technology, civil engineering, immigration, and construction. She specializes in conflicts of interest, third-party risk management, and developing and implementing policies and procedures in-house. She also enjoys creating custom ethics and compliance programs for clients. Welcome, Kasturi. We're very pleased to have you here today.
Kasturi: Hi, Niyati. Thanks so much for inviting me to talk about conflicts. I want to start off by saying that all views are my own. They're not representative of my employer. And I'm doing this in my individual capacity. All examples are hypothetical. Thanks so much for having me again.
Niyati: Thanks, Kasturi. So getting right into it, please tell us more about your role and your background and how this area of law that is ethics and compliance interested you in the first place.
Kasturi: So this is really odd, but I knew I wanted to be a lawyer since eighth grade, right? And I was born in the US and mostly raised in India. And the education system there differs a lot from the US in the sense that you decide your path pretty much by 16, 17, 18. And you could specialize in science, math, or art. I chose science as it gave me the most options. But the back of my mind, I was like, oh, I know I want to do law. So end of 12th grade, my parents were like, what do you want to do? And I said, law. Right now, I hold three degrees in law, mostly focusing on business law. I was the teaching assistant for banking and finance law at a point, taught a few classes there. Now, my very first job out of my first law school was at a technology company. And I worked in the ethics and compliance department. Very green at that point. But the more I worked in it, the more I knew that this was something I could actually look at doing in the future, something really fun. I pivoted into immigration compliance after that, came back to ethics and compliance, and I truly enjoy it. It's like every day is a strategy or a logic puzzle. Where answers aren't black and white, you operate in a lot of gray in any company dealing with ethics and compliance. And there's always so much to learn in the field. I love interacting with people. There's a lot of that in the field. And a very strong community that wants to help.
Niyati: That is excellent. You've had a great career path so far, Kasturi. I'm sure it's going to only grow in the future. I wanted to, for our audience members, I wanted to ask a more basic question. Can you define what a conflict of interest is and explain why it's important for both individuals and organizations to recognize them?
Kasturi: Yeah, absolutely. So conflicts of interest and very broadly, let's say there are two interests and these could be multiple interests as well. that a single person holds, right? And one of them could be or is prejudicial to the other interest. Now, the interesting part is sometimes these interests may not necessarily be prejudicial or cause harm to the other interest. But when there is some aspect of a duty of care or a fiduciary duty to one interest. Holding both or multiple interests could appear conflicting. And because of this, identifying and mitigating these conflicts is so important. And of course, there are guidelines and disclosure requirements as well. But sometimes it's the liability repercussions. And when I talk about liability, I mean, financial, revenue-based reputation. It's a loss of time, loss of revenue, loss of reputation. And when we look at the term interest here, Niyati, so broadly defined, it could be a role that you hold, a financial interest, personal relationships, good or bad, right? Professional affiliations. And as human beings and individuals, sometimes conflicts occur because of the nature of our personal life. So let's say close personal relationships, including people you may have a terrible relationship with, which could be material depending on the circumstance. And some of these come about because of career progression, people you've worked with, financial interests, or even subject matter expertise, because that makes people want to be part of organizations or dialogues.
Niyati: How do you distinguish or one distinguishes between real potential and apparent conflicts of interest in everyday business situations?
Kasturi: So I'd love to go through hypotheticals to illustrate this. And some of the hypotheticals here might be just glaring conflicts of interest, but they illustrate it pretty well, I guess. So if you look at real conflicts of interest, let's say Jack and Jill, they're part of the same organization. They work for the same organization. Jill is in Jack's reporting line. Now, Jack supervises Jill at work, and he's the sole person responsible for Jill's performance evaluations and career progressions. This is a real conflict of interest and a very, very obvious one. Now, it's a very obvious example. This could be a conflict of interest in most, if not all industries, in all roles. Let's look at a potential conflict of interest. Let's say Jack owns 20% stock in company X. Jack works for a different company, and the company that employs Jack, they want to contract with company X. Now, this whole contract or the work with company X, this isn't related to Jack's department or work right now. But this could be a potential conflict of interest where measures can be put in place to ensure that Jack is separated from activities regarding company X, if he could, you know, foreseeably be a part of that at some time in the future. Let's say promotions or just natural career progression. So again, a very simplified version of what a potential conflict of interest could look like. Now, apparent conflicts of interest, this is where it really gets tricky because it's all about perception. And apparent conflicts exist where it could be perceived or it appears that a person's interest could influence the performance of their duties. And the kicker is whether or not this is the fact. So it may absolutely not influence the performance, but if it appears to do so, it's an apparent conflict of interest. So let's say Jack is in a really high visibility role and he works for a small company. And let's go back to the facts of the potential conflict of interest. So he owns 20% stock, Company X. Company X is a vendor to the company that employs Jack. Now, even if internally measures are already put in place, that Jack will recuse himself when it comes to activities concerning company X. He can't evaluate company X's work. But to a reasonable third person who's like, oh, I know about Jack's role with this company that employs him. I know about his stake in company X. This might appear to be an apparent conflict of interest. And they may say, oh yeah, of course, Jack's company is conducting business with X. That's because of Jack's role with the company. It's all about optics there. And if you replace financial interest here with, let's say, a close personal relationship, we're looking at the same apparent conflict. And apparent conflicts might become potential conflicts if it could be reasonably deduced that, oh, Jack may have to work closely with X in the future due to his role.
Niyati: I see. That's some super helpful hypotheticals. It is definitely important to be able to at least recognize there might be a potential conflict. And I think that's where you step in, where you're identifying these potential conflict of interest areas.
Kasturi: Absolutely, yeah.
Niyati: What is the process really for testing whether an apparent conflict is truly problematic and why does one, either individual or organization, need to address these apparent conflicts, even if they don't pose, for the lack of a better term, a real risk?
Kasturi: No, that's an excellent question. I'm going to start off by talking about the importance. On a very high level when we're looking at processes and procedures and all aspects of work we're looking for a certain fairness and process and oftentimes even the perception of unfairness just a perception that can undermine impartiality can undermine confidence and going back to the concept that some relationships have some sort of fiduciary duty or an actual fiduciary duty or a duty of care. And that's why so many places have added the concept of apparent conflict of interest as part of their bigger conflict of interest program or guidelines or policies. And in my opinion, the importance of apparent conflicts of interest, this increases when a person is client-facing or they're in a high visibility role. Now, how do I define client very broadly? Client is how that organization or even that particular relationship defines a client It could be the people you serve, the people you have a duty towards. Now, why is it important there? Because this person's job at that point, it has two aspects to it. So one is, how is this person actually performing work, right? How are they actually performing their tasks? And two is the perception aspect we spoke about. How are people perceiving this person's relationship because of their role? How are people perceiving them performing these tasks? So coming you ask me what test is used and I would say that is the reasonable third person test and I believe the IBA 2024 guidelines also uses that test which is a reasonable third person having knowledge of relevant facts and circumstances would it give rise to justifiable doubts in their mind as to this person's impartiality or their independence so would this reasonable third person so to speak would they think oh this person would lean towards or ensure that things lean towards a particular outcome, given these facts and circumstances. And this perception or appearance of how this person would lean could be conscious or subconscious and could consciously or subconsciously influence their other interests, whether or not that's true. Now, once again, once an apparent conflict is disclosed to the organization, now you said, why is it so important? Let's say someone discloses an apparent conflict of interest, right? The organization can look at it and start doing their measures. Now, let's say someone comes up to the organization, they go, oh, you have this person, this whole thing looks like a conflict of interest. They can say, look, we are aware of the situation or disclosures have been made. We've implemented measures A, B, and C, which should mitigate the conflict. Should the situation you're so apprehensive about arise? So we've captured it, you're addressing it. And that builds a culture of strengthening trust in both the organization and within the organization.
Niyati: Thanks, Kasturi. So just dovetailing into the last point you mentioned, I think that flows very nicely into my next question. Actually, it's a two-part question. What are the most practical steps an organization can take to identify conflicts of interest early on before they become major issues or risk areas? And the second one that flows from that and goes to your previous point, how can or how should leadership set the tone for effectively managing conflicts of interest within the organization?
Kasturi: I like these. I'd say the three things to keep in mind is determine, disseminate, and disclose. I'll go through them. So the first one is determination. It's talking about determination. Any organization, the first step is looking at how you would define a conflict of interest according to your organization's business or industry. Now, industry-wide, you might have a definition, right, or an idea of what's considered a conflict by your industry. But bringing that down into your specific jurisdiction and bringing it down into your specific organization by looking at the risk threshold there, that's the determination factor. And this evaluation really helps because now you can say, okay, here's what we look at as a conflict, And here's the policy or here are the guidelines around conflicts of interest. And that's the dissemination part. So where people are aware of the policy and there's a top-down approach. So let's look at another hypothetical. I love my hypotheticals. So let's say…
Niyati: Go for it.
Kasturi: Absolutely. Thanks. Let's say Jack and Jill are in their regular one-on-ones, right? And they're talking about something and Jack mentions a board that he sits on. Let's say the same industry that he works in. So at that point, Jill can say, hey, Jack, we have this conflict of interest disclosure process. We have a policy and this is what you need to do. But the ideal situation is where Jill's team already knows that this could be a potential conflict or a real or an apparent conflict, depending on what the situation is. goes to Jill and says, hey, this has come up. I'm starting the process to notify and disclose, even if it's an apparent conflict. And how does that happen? That happens mostly through experience. But it also happens to knowing what hypothetical conflicts look like. So it's relatively easier to think about the topic of conflicts of interest should one come their way. So regular training, regular communication about the process and getting the essence of why across in business terms. So when you're looking at people in the business, they're looking at getting the best end result possible. They're looking at the best efficiencies possible. So when you get it across to them, showing them how this impacts their day-to-day, it really makes a difference. Like we spoke about in our Jack and Jill case, right? Self-disclosure is also something that's really helpful. And self-disclosure could be as soon as the conflict is identified, could be before selection or staffing, and then the organization implementing controls to capture conflicts at different points now that could be like a yearly disclosure beginning of year end of year.
Niyati: And do you think the leadership should be or they have something in their policies regarding regular check-ins with the employees regarding maybe because if they only disclose once a year that might be too late or maybe there is no channel of communication so is that another consideration that there should be open channels of communications should there be such a conflict of interest or potential conflict of interest that arises?
Kasturi: Absolutely. So along with self-disclosure, which is part of what should happen in an organization, implementing those controls to capture them at different points. I gave an example of the yearly disclosure, but that could happen at different points in time. And also something that should be part of regular chats with your employees. And for middle managers to really know and recognize that certain things are conflicts of interest, that's really helpful.
Niyati: Understood. Yeah, that makes total sense. And Kasturi, once the conflict of interest is identified, what is the process for disclosure? Can you share with our audience?
Kasturi: Absolutely. So disclosure, it's so dependent on an organization system, right? So different industries, different companies and their own systems of disclosure. But going back to what you said, you said, it's so important for this to be caught at different points in time. Do they know who to go to? Identifying the owners, right? The owners of the whole conflict of interest process. So who do you need to disclose this to? How do you disclose this? And then managing the disclosure after disclosure because it's not about saying oh the disclosure has been made okay well that's done so it's the measures that's taken after and implemented after and by that i think a culture is built where an organization looks at and says you know this might be an excellent business opportunity but we recognize how severe the conflict is and we're going to bow out we're not going to put ourselves in that scenario. So absolutely, having a streamlined process for disclosure, very, very important. And knowing who you can go and talk to is also important.
Niyati: Right. And after a conflict is disclosed, who bears the responsibility for managing or mitigating the situation? Does it shift from the individual to the organization? Or does the individual have that responsibility?
Kasturi: I think it's both. To be very honest, I think it's a dual responsibility. Now, we spoke about disclosure and earlier on we said, okay, sometimes organizations, when they see a disclosure and they say, okay, this is a situation where we need to put mitigations or measures in place. So you're putting those measures in place for that particular individual. So it's the responsibility of the person to go back to the organization and say, oh I don't think I can implement this measure right or this doesn't work in practice for me what do I do now or they may want to go back and say ABC has come up and I really think, this has to be re-evaluated and that's on the individual now the organization's responsibility that's implementing controls and that also goes back to having a really clear policy having a really clear disclosure process, having systems, implementing controls, and going back to these disclosures when an individual raises concerns and say, okay, we really need to look at this again. And we also looked at earlier how apparent conflicts could become potential conflicts of interest. And again, that's on the individual to be aware of how this comes across and what situations lead to it. And keep the organization notified, because let's say it's a huge organization, you Some of the burden definitely rests on the employee or the individual to come back to the organization there.
Niyati: That makes sense. Thanks, Kasturi. So for my next question, this is more of practical guidance in what you have learned from your roles at various organizations. What are some common mistakes organizations could make or do make when dealing with conflicts of interest and how can they avoid these pitfalls?
Kasturi: Absolutely. So I'm actually going to look at, how do I say, I'm going to look at this in a more positive way. So what are common mistakes? I'm going to look at things you can do that would most of the time ensure that you're not making mistakes when it comes to conflicts of interest. I mean, of course, ideal or best state is where conflicts are managed proactively, right? Then putting out fires, for example. For real human, fires may occasionally arise, as they do. But one is knowing what your risk quotient is. And going in with knowledge of the risk quotient. And of course, you're looking at applicable laws, you're looking at applicable guidelines, but you also really need to look at and understand your business. You're going to benchmark what you do against similar organizations and you're evaluating and determining the risk appetite of different levels of the organization. And keeping that in mind when coming up with policies And coming up with even the mitigations is really important. This also extends to your client base. We spoke about how broadly I define clients when talking about clients here. But what kind of clients do you have? What disclosures may be necessary or what disclosures do they expect to build that concept of trust in you, even if it is an apparent conflict of interest? Another really important thing when dealing with conflicts of interest is involving stakeholders at all levels. And this could be stakeholder departments that you work with. This could be the individual, individual's manager, individual's manager's manager. People who are involved in this need to know they live, so to speak. So when you're drafting mitigation measures or you're trying to implement these measures, people aren't left in the lurch, so to speak. They know what their lift is. They know the pros and cons. They understand the measures put in place. And when you understand the business and you understand your stakeholders and you bring them in, that's a holistic way of ensuring that your conflict of interest guidance is practical.
Niyati: So, Kasturi, I understand from what we've discussed so far that communication, open communication channels, that's important. Having great policy, which is substantively updated and amended as organizations grow and keeping in mind who the clients are. Those are some effective strategies to make sure that there's disclosure, there's communication, there is mitigation, or there's avoidance of conflicts of interest. Are there any additional specific strategies or tools that work best in practice?
Kasturi: I think understanding that your mitigations aren't set in stone. That's so important to understand. Now, mitigations, they can vary industry by industry. And even within these industries, your mitigations can be very case-specific. The whole nature of conflicts of interest is that there isn't a one-stop solution. It's so case-specific. So you may have precedents within your organization to say, oh yeah, we handled ABC in a certain way. But that serves as a guiding point and that may not necessarily translate into something set in stone because of case specifics, because of the parties involved. So always keeping that in mind, keeping the flexibility in mind. And we spoke a lot about apparent conflicts of interest. So optics is something that's so important. At times, the conflict may not be a legal risk, but it could lead to reputational risk. And reputational risks are eventually going to lead to loss of revenue, loss of time, loss of confidence. And we spoke about how perception plays a huge role in apparent conflict. So being mindful of optics across any kind of conflict, that's a definite good practice to have.
Niyati: I think that's an excellent point, that reputational risks do, in turn, even if they were not actual conflicts of interest, they do have an impact on revenue. They could, especially for organizations having a wide range of clientele who's looking at what reputation you have.
Kasturi: I want to agree with you because sometimes organizations, like we spoke about, they might see an excellent business opportunity and they may say, oh, this is so good, but they'll actually bow out of it, not because there is a real or potential conflict, but because the optics looks really bad in that case. And that's the appearance or perception, because good business relationships, they're built on trust and they're built on confidence. So reputation is so, so important when looking at conflicts of interest. When it comes to practicality of mitigations, it's just looking at, is what I've drafted on paper, does that translate into practice well? Is this practically implementable? And that's something important to keep in mind.
Niyati: Thanks, Kasturi. So now speaking about more non-conflict related, less serious issues, I'm very curious to know if there is a mentor you've had in your legal career or an inspiration that you hold close to your heart.
Kasturi: Honestly, when I look at mentors, I'm not going to name a single person, but I see so many women of color these days owning their roles. In the legal industry, in the ethics and compliance industry. And that makes my heart so happy being a woman of color myself. And I see this more and more. And I see them reaching places which was harder for them to reach probably a couple of decades ago. And that actually keeps me going. And I like reaching out to them and saying, how do you do this? How do you tackle ABC? And they're always so ready to help. That's a trend that keeps me going.
Niyati: That's beautiful being being a woman of color myself I feel the same way I think the glass ceilings are are being shattered as we speak which is excellent. Kasturi, what is one quote or book and you can pick whichever one you want to answer which that you love has has been important in your life or something that you keep coming back to if there's like a favorite book or a certain quote by somebody it could be an original quote as well.
Kasturi: I’m gonna go back to this book that I picked up I picked this up second hand I live in Berkeley California I picked this up second hand. In Pegasus or Moe’s books I can't remember and I almost put it down because I wasn't familiar with and I was like do I really want this and that's become my most read book it's Tuesdays with Morrie, I picked up the book I read it on my commute to work every day and when I reached the end of the book I remember it was on an evening coming back home and I was in tears. Everyone on the train must have thought I had a really bad day but no the book moved me to tears and Maury in that he has a terminal illness he knows he's going to pass away so he talks to one of his former students, and passes on these nuggets of information but has written the form of a story.
Niyati: I might have to borrow that from you.
Kasturi: Oh my gosh. It is one of the most beautiful books I've ever read. I made my whole family read it. And he has this quote that says, love or perish. And I think we can use that by changing the word love. We can use that for a lot of aspects in our life. Change or perish, right? About looking at changing times. And also be kind or perish. I think kindness is so important. and doesn't translate to weakness.
Niyati: Kindness is so important.
Kasturi: It is so, so important. And that whole book has really changed the way I look at things. So on a day when I'm feeling really low about something, I read that book and I'm just like, nope, time to put your socks up.
Niyati: Well, that sounds beautiful. Thanks, Kasturi, for sharing that. And thanks so much for joining us today for this podcast. If any of our audience members have questions, please feel free to reach out to Kasturi or me. Thank you, Kasturi, for joining us again.
Kasturi: Thanks, Niyati.
Outro: Disputes in Perspective is a Reed Smith production. Our producers are Ali McCardell and Shannon Ryan. For more information about Reed Smith's litigation and dispute resolution practice, please email disputesinperspective@reedsmith.com. You can find our podcast on podcast streaming platforms, reedsmith.com, and our social media accounts at Reed Smith LLP.
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