Purchasing Ethics - Conflict of Interest Explanation & Impact

A conflict of interest occurs when a party has competing interests or loyalties because of their duties to more than one person or organization. A person with a conflict of interest can't do justice to the actual or potentially conflicting interests of both parties.

Conflict of Interest represents a critical threat to the overall accuracy and efficacy of a decision. On an Organization level, COI incidents can harmfully damage the Integrity of an organization in doing business, may result in severe consequences to its reputation in the market among other competitors, and can lead to legal disputes in courts.

Hence, COI can severely impact the Agent-Principal fiduciary relationship. On an employee level, Failing to disclose and being involved in conflicts of interest can have severe consequences for workers, including termination, in cases where a conflict is irreconcilable with a worker’s role in the organization; restriction of access to certain information either on a temporary or permanent basis; removal of authority over certain issues; the involvement of authorities if unlawful acts have been carried out; divestments or liquidation of financial interests that are in conflict, as well as personal reputational damage.

Therefore, accepting Super Bowl tickets to discuss a potential multi-million dollar deal with a strategic supplier would represent a COI as the buyer's decision will be biased due to favoring this supplier as a friend and treating them more friendly than other competitors, the place and time will not be suitable to discuss and reach an agreement with the terms and conditions, and the supplier would perceive winning the deal as an obligation from the buyer in reward to inviting them to the super-bowl match.