Final answer:
A conflict of interest is an ethical issue where a person's private interests may influence their professional decisions, potentially leading to personal gain at the expense of their employer or organization.
Step-by-step explanation:
A situation in which a person or organization may benefit from undue influence due to involvement in outside activities, relationships, or investments that conflict with or have an impact on the employment relationship or its outcomes is referred to as a conflict of interest. This ethical challenge occurs when there's a divergence between an individual's private interests and their professional responsibilities, leading to the possibility of a personal benefit at the expense of the entity they represent.
In the context of business, a conflict of interest can undermine trust and ethical conduct. For instance, if an individual in a company stands to personally gain from a vendor that the company uses, without disclosing this relationship, they purposefully place themselves in a situation with conflicting loyalties. Not only is this likely to affect their decision-making on behalf of the company, but it also introduces potential bias that could harm the company's best interests.
The process of addressing these conflicts usually involves transparency, often necessitating that the individual discloses the conflicting situation to stakeholders, refrains from participating in related decision-making, or in some cases, divests from the conflicting interest.