Managing conflicts of interest at all levels in your projects

Conflicts of interest are often an underestimated risk in project environments. While they are commonly associated with ethical breaches or high-profile governance failures, conflicts of interest can arise in everyday project decision-making, sometimes without malicious intent. When left unmanaged, they can undermine trust, distort judgement and weaken project governance.

In structured project management, particularly in environments that demand transparency and accountability, managing conflicts of interest is essential. It supports ethical project management, protects decision integrity and reinforces confidence among stakeholders. Understanding how conflicts arise and how to manage them at every level of a project is therefore a critical leadership responsibility.

What is a conflict of interest in a project context?

A conflict of interest occurs when an individual’s personal, professional or financial interests could influence, or be perceived to influence, their ability to make objective decisions. In projects, this risk is particularly significant because decisions often affect budgets, suppliers, scope, priorities and people.

Importantly, a conflict of interest does not require wrongdoing to exist. The perception of compromised judgement can be just as damaging as an actual breach. For this reason, ethical project management focuses not only on avoiding inappropriate behaviour, but on ensuring transparency and trust in how decisions are made.

From a project governance perspective, unmanaged conflicts of interest can lead to poor decision-making, reduced stakeholder confidence and increased project risk.

Why conflicts of interest matter for project governance

Strong project governance depends on clarity, accountability and impartial decision-making. When conflicts of interest are present, these foundations are weakened. Decisions may appear biased, risks may be downplayed, or alternatives may not be evaluated fairly.

In regulated or publicly accountable environments, such as government, infrastructure or large-scale transformation, failure to manage conflict of interest can also expose organisations to reputational, legal and financial consequences. Even in smaller projects, unresolved conflicts can erode team trust and damage collaboration.

For these reasons, conflicts of interest should be treated as a governance and risk management issue, not simply a personal ethics concern.

How a conflict of interest can arise at different projects levels

Conflicts of interest in projects can emerge in multiple ways, depending on roles and responsibilities.

At project team level, conflicts may arise where individuals have personal relationships with suppliers, external contractors or colleagues whose work they are assessing. There may also be conflicts where team members stand to benefit from specific technical or design decisions.

At stakeholder level, conflicts can occur when stakeholders have competing priorities or vested interests that influence requirements, acceptance criteria or benefits realisation. For example, a stakeholder may push for decisions that favour their department rather than the wider organisational outcome.

At project board level, the risks are often more significant. Board members may hold multiple roles within the organisation, have commercial relationships with suppliers, or be accountable for outcomes beyond the project itself. If these interests are not declared and managed, strategic decisions may be perceived as compromised.

Identifying and declaring conflict of interest

The first step in managing conflict of interest is recognising that it can and will occur. Projects that assume conflicts only arise through misconduct often miss early warning signs.

Effective identification relies on clear expectations and open culture. Individuals should understand what constitutes a conflict of interest and feel supported to declare potential issues early. Declarations should be treated as a routine governance practice rather than an admission of fault.

In structured project environments, conflicts should be formally recorded, reviewed and revisited as roles, suppliers or circumstances change. This ensures visibility and consistency throughout the project lifecycle.

Managing and mitigating conflicts of interest

Once identified, conflicts of interest must be actively managed. The appropriate response will depend on the nature and severity of the conflict, but common mitigation approaches include:

• Recording conflicts formally and ensuring transparency in decision-making
• Removing individuals from specific decisions where impartiality could be compromised
• Introducing independent review or assurance for high-risk decisions
• Rotating responsibilities or adjusting roles where conflicts are ongoing
• Escalating unresolved conflicts through governance routes

These actions support ethical project management by ensuring that decisions remain defensible, auditable and aligned with organisational values.

Conflicts of interest as a project risk

Conflicts of interest should be considered within project risk management, not treated separately. It can affect cost, quality, stakeholder confidence and delivery of expected benefits. As such, it should be assessed, monitored and reviewed like any other governance-related risk.

In PRINCE2® Project Management, risk management and governance are closely linked. Clear roles, defined responsibilities and escalation routes help to ensure that conflicts are surfaced and addressed at the right level. Managing by exception also ensures that significant governance risks are escalated rather than absorbed into day-to-day delivery.

By integrating conflicts of interest into the project’s risk approach, teams avoid treating it as an afterthought and instead embed ethical awareness into routine decision-making.

The role of leadership in ethical project management

Project leaders and boards play a central role in setting the tone for ethical behaviour. When leaders are transparent about their own interests, and proactive in managing conflicts, it reinforces trust across the project environment.

Conversely, when conflicts are ignored or handled informally, it signals that governance is negotiable. This can lead to inconsistent behaviour, reduced confidence and increased exposure to risk.

Ethical project management is not about creating excessive controls, but about creating clarity and confidence. Clear processes, consistent application and visible leadership support are key.

Strengthening governance through proactive management

Conflicts of interest are an inevitable reality in complex projects, but they do not have to undermine delivery. When identified early and managed transparently, conflicts can be contained and trust maintained.

By embedding conflict of interest management into project governance, risk management and leadership practice, organisations strengthen decision-making and protect the integrity of their projects.

Understanding how conflicts arise and how to respond effectively is a core capability for anyone responsible for governance or assurance. It reinforces ethical standards, supports accountability and helps ensure that project outcomes are delivered in the best interests of the organisation and its stakeholders.

Explore our PRINCE2 Project Management training and understand how it supports ethical, well-governed project delivery by strengthening leadership, governance and risk management capability across all levels of your organisation.