Ignorance is Bliss: Until it Isn’t

Michael Riches

Oct 3

5 min read

Updated: 14 hours ago

There is a quiet, dangerous comfort in the phrases we use to brush aside warnings.

“That’s just how this industry operates.”

“Let’s deal with that when we have to.”

“It’s not that big an issue.”

“I don’t want to know.”

Deliberate blindness may offer temporary comfort. But it often ends with a crisis and a knock at the door. All too often, what follows is a shift from accountability to blame and obfuscation, accompanied by the silent wish that earlier warnings had been heeded.

Ultimately, the cost of damage control dwarfs the price of proactive management.

Our perspective

We get it. Governance is not always sexy, and few get really excited about it. In the corporate environment, many see governance and compliance as a checklist to be completed on the side, rather than an integral part of corporate activities. Worse still, some see it as a barrier to what the organisation should be doing.

That is both unfortunate and misguided.

We have seen countless examples of poor risk management resulting in an adverse outcome. In many cases, what stands out most is the ease at which the earlier warnings could have been addressed.

And notwithstanding the numerous public examples of governance failures, together with the hard work of internal governance professionals, time and time again we still come across examples of individuals and organisations turning a blind eye to obvious issues of non-compliance and poor governance.

In doing so, people are gambling on a nothing more than luck. Hoping disaster or scrutiny simply passes them by.

But it is too expensive or cumbersome to address!

The economics of ignoring risk is inherently flawed. Deferring expenditure on governance controls does not save money. It simply compounds the cost of the inevitable failure.

We have seen major Australian retailers and large corporations be ordered to repay millions in underpayment of wages, together with legal penalties and remediation programs, often because of payroll systems that were known to be inadequate.

AUSTRAC has taken action against large financial and gaming companies over failures to properly implement anti-money laundering controls.

But we know that the cost of governance failures is not reserved for the big end of town.

We have seen examples of small businesses and associations whose lax financial controls have meant improper spending, financial theft, and regulatory scrutiny. Take for example the Belmore Bowling & Recreation Club, where in 2024 the former secretary was convicted of embezzlement of $11,000 of association funds.

We Didn’t Know!

Nice try.

Regulators, courts and oversight bodies are not only interested in what you knew. They will also ask what you should have known, and what steps you took to find out.

Proper governance cannot be satisfied by a non-inquisitive, blinkered view of the organisation. It means looking into uncomfortable corners, having difficult conversations and thinking through every corporate activity.

A leader or board that deliberately avoids asking tough questions to maintain deniability, or avoiding the need to make a difficult decision, is not being prudent. They are putting themselves, their workers and their organisation at risk.

When an investigation begins, it is inevitable that that passive ignorance will be scrutinised.

The True Cost of Poor Governance

Effective governance requires commitment. It takes time to think through organisational risks and settle upon effective controls. There can be costs in identifying and managing risks.

But governance failures can extend well beyond huge financial costs.

Decades of Trust Erased in Days

Failures to address conflicts of interest, apply proper governance and ensure compliance with duties, is a sure fire way of eroding trust, both internally and externally.

Recent matters involving large accounting firms highlight how poor internal controls can ruin an organisation’s reputation in days. The impact of reputation damage can be long lasting and difficult to rebuild.

The Human Toll

Of course, there can be no greater cost than the loss of life or significant injury resulting from a failure to address risks.

Australia’s first ever industrial manslaughter case is a perfect example.

In that case, 58 year old Barry Willis was crushed to death after a forklift, operated by an unlicenced and inexperienced worker, pinned Mr Willis between the forklift and a truck.

The small auto-wrecking business had no written safety systems, no written safety policies, did not check to ensure the forklift driver was appropriately licenced and did not have in place an active Workcover policy. After the incident, the director misled emergency services, and Mr Willis’ family about the cause of the injury and did not properly report the incident to work safety authorities.

Beyond the devasting loss of life, the company was fined $3 million and its directors were each convicted of reckless conduct.

In another case, a business owner was using a forklift to unload a generator from a trailer when the generator fell and landed on another worker, killing him. The worker was a friend of the business owner.

The business owner was found to be unlicenced to operate a forklift, had no safety procedures in place, had not checked the weight of the generator, had not ensured clear space under and around the forklift, and had not provided any instruction to the worker.

Besides the shocking death, the business owner was convicted of industrial manslaughter and sentenced to 5 years imprisonment, suspended after having served 18 months.

There are a multitude of other examples of failures to properly address known risks resulting in terrible outcomes.

Moving From Bliss to Action: Some Practical Steps

Navigating complex governance risks does not require perfection on day one. But it does require demonstrable commitment, courage and curiosity.

Here are some tips.

Reward the surface-level warning: Actively incentivise workers to bring forward operational risks and systemic issues before they crystalise into real harm.
Conduct Independent, focussed governance reviews: Internal reporting often suffers from the inevitable, and often unintentional, bias that comes from navigating objectivity with corporate loyalty. While internal governance teams are essential, periodic, objective reviews by independent experts can provide a “warts and all” perspective and offer that additional layer of confidence.
Reframe compliance as strategic value: Viewing governance solely as a checklist exercise does little to embed it as a routine aspect of corporate activity. View robust governance as a competitive advantage that helps protect the organisation and secure long-term market confidence.
Act promptly on what you discover: Finding a governance weakness is only half the battle. Once an issue is identified, develop a realistic remedial plan and act on it without delay.