"I've just discovered that one of my managers is having a relationship with one of his female colleagues. How do I deal with this?"
You need to decide what you want your policy to be. Given that a number of successful relationships start at work, and that many mutually agreeable relationships pose little real danger, most companies have stopped trying to put a ban on relationships.
However, if the colleague is a subordinate, especially a direct report, relationships are almost always a bad idea and should be actively discouraged and/or banned under your company policy. If you decide to go down the prohibition route you must make the rules clear and impose them consistently.
Generally, if you're going to allow employees to have personal relationships with other employees, be sure to have a clear policy on harassment. What is viewed as flirting in a normal relationship could be seen as threatening at work. It's important to remember that you have a duty of care to all employees.
A fraternisation policy won't prevent romance at work from developing. It will, however, make life less risky and ensure everyone knows where they stand.
Make sure you manage any situations to minimise risks. These can include perceived or actual favouritism, lack of confidentiality, supposed or actual, and any repercussions if the relationship fails.
Make sure those involved understand the implications of things turning sour. If the relationship does fail, try to support both parties and be on hand to help minimise any fallout.
Jane Sunley, www.learnpurple.com