Conflict Of Interest: What It Is And How To Manage It

A conflict of interest is not the same as wrongdoing. Almost everyone will face one at some point, a friend applying for a role, a supplier who is also a neighbour, a side business that overlaps with work.

The problem is never that the interest exists. The problem is when it is hidden and left to quietly shape a decision.

This guide explains what a conflict of interest is, the three types, real examples, what Australian law requires, and how to manage conflicts so they stay harmless.

Sentrient is an Australian-built GRC platform for compliance, risk and HR. See our workplace compliance system and compliance courses, built for Australian and New Zealand workplaces.

What Is a Conflict of Interest?

A conflict of interest is a situation where a person’s private interests could improperly influence, or appear to influence, the way they carry out their duties.

Those private interests might be financial, family, friendship or personal gain. The interest itself is neutral. What matters is whether it is disclosed and managed, or left to distort a decision that should be made on the merits.

Managing conflicts well is a core part of good governance, risk and compliance. It protects the fairness of decisions, the trust of customers and staff, and the reputation of the business.

The Three Types: Actual, Potential and Perceived

Recognising the type of conflict helps you respond to it in the right way:

Perceived conflicts matter as much as actual ones. Trust is damaged by how things look, not only by what was actually done, which is why the safe response to all three is the same: disclose and manage.

Conflict of Interest Examples

• A manager involved in hiring or promoting a family member or close friend.
• An employee with a side business that sells to, or competes with, their employer.
• A procurement officer awarding a contract to a company owned by a friend.
• A board member voting on a deal their spouse stands to benefit from.
• Accepting a significant gift or hospitality from a supplier during a live tender.

What the Law Says in Australia

For most staff, managing conflicts is driven by company policy rather than a single statute. For company directors, the obligation is legal. Under the Corporations Act, a director with a material personal interest in a matter must generally disclose the nature and extent of that interest to the other directors. ASIC sets out clear expectations for managing conflicts in corporate governance.

Beyond directors, conflicts intersect with other duties too. Undisclosed conflicts can feed fraud and corruption risk, undermine fair procurement, and in people decisions can cut across the obligation to keep hiring and promotion fair. A clear, followed policy is how most organisations meet all of this at once.

How to Manage a Conflict of Interest

You do not remove conflicts by pretending they never happen. You manage them with a simple, repeatable process:

What a Conflict of Interest Policy Should Cover

A workable conflict of interest policy is short and specific.

It should define what a conflict is and give examples, explain the three types, set out how and to whom people disclose, describe how conflicts are then managed, and make clear that a disclosure register is kept.

It should sit alongside your code of conduct and be part of how you approach policy management across the business.

Why Getting This Wrong Is Costly

An undisclosed conflict rarely stays small. A single quiet decision, a contract to a friend, a hire that was not on merit, becomes the story that costs a client, a staff member’s trust, or a regulator’s confidence.

The cost is almost never the conflict itself. It is the fact that it was hidden. A culture where people disclose early, without fear, is the cheapest insurance a business can buy, and it depends on a workplace culture that treats disclosure as normal.

The scale is easy to underestimate. In the ACFE 2024 Report to the Nations, corruption, the category that includes conflicts of interest, was the most common fraud scheme, appearing in 48% of cases worldwide. An undisclosed conflict is not a rare edge case. It is one of the most common ways things quietly go wrong.

Where Sentrient Fits

Sentrient turns your conflict of interest process into something you can prove. It hosts your conflict of interest policy with individual acknowledgements, delivers conflicts of interest training so people can spot and disclose a conflict, and keeps the records so that when a question is asked, you can show what was disclosed and what was done about it.

Being straight about scope: a policy and a register do not remove human judgement. What they do is make disclosure easy and expected, and make your handling of conflicts visible and defensible, which is exactly what Sentrient is built to support.

Make disclosure easy and your handling of conflicts provable.

Disclose Early, Manage Openly

A conflict of interest is not a scandal. It is a normal situation that only becomes a problem when it is hidden. Know the three types, name the examples out loud, make disclosure quick and safe, manage each conflict on the record, and keep it current as people and relationships change. Do that, and conflicts stay what they should be: managed, documented and harmless.

Frequently Asked Questions

1. What is a conflict of interest?

A conflict of interest is a situation where a person’s private interests, such as financial, family or personal gain, could improperly influence, or appear to influence, how they carry out their work duties. The interest itself is not wrongdoing. The risk is when it is hidden and left to shape a decision.

2. What are the three types of conflict of interest?

Actual, where a real conflict exists now between a private interest and a duty. Potential, where an interest could conflict with a duty in future. Perceived, where a reasonable person could think an interest is influencing a decision, even if it is not. All three are managed the same way: disclose and manage.

3. What are examples of a conflict of interest?

Hiring or promoting a family member, running a side business that sells to your employer, awarding a contract to a friend’s company, a director voting on a deal their spouse benefits from, or accepting a large gift from a supplier during a tender.

4. Is a conflict of interest illegal in Australia?

The conflict itself is usually not illegal. For company directors, the Corporations Act requires disclosing a material personal interest to the other directors. For most staff, managing conflicts is driven by company policy, though undisclosed conflicts can lead to fraud, unfair decisions and serious reputational harm.

5. How do you manage a conflict of interest?

Identify it early, disclose it to the right person on the record, manage it with a control such as stepping back or adding oversight, record it in a register, and review it as roles and relationships change. The aim is open management, not pretending the interest does not exist.

6. What should a conflict of interest policy include?

A definition with examples, the three types, how and to whom people disclose, how conflicts are then managed, and confirmation that a disclosure register is kept. It should sit alongside your code of conduct and wider policy set.

7. How does Sentrient help manage conflicts of interest?

Sentrient hosts your conflict of interest policy with individual acknowledgements, delivers conflicts of interest training so people can spot and disclose conflicts, and keeps audit-ready records so you can show what was disclosed and what was done about it.

Sources

• ASIC, Managing conflicts (corporate governance)
• ASIC, Obligations of company officeholders
• Australian Human Rights Commission, The positive duty
• ACFE, Occupational Fraud 2024: A Report to the Nations

Related Reading

• Code of Conduct: What It Is and What to Include
• What Is GRC? Governance, Risk and Compliance Explained
• Policy Management in GRC
• Free Conflict of Interest Policy Template