External Whistle Blowing System – Top 5 Reasons An Organization Would Want To Implement One – Whistleblowing

1) Wrongdoing

Businesses and organizations often need to implement an external whistleblower solution because they have been caught off guard in the recent past.

By “caught off guard” I mean they have just come out of an incident or incidents that damaged their reputation, likely involving legal action, and possibly court fines or even criminal trials and convictions. .

Actual wrongdoing in the workplace could have been anything – fraud, racism, sexism, corruption, insider trading – but it’s the consequences that really matter here.

These incidents of wrongdoing really do damage to an organization.

A private company can suffer such damage to its reputation that it has an impact on its profits, its turnover and even its ability to recruit. A publicly traded company could suffer a drop in share price and force directors and the board to resign. A charity could see its funding reviewed and cut or see its donations reduced to nothing.

In the worst case, the business may go bankrupt or the organization collapse.

That’s how bad it can get.

No wonder these organizations want to prevent this from happening again. It’s no wonder they want to show they’re proactively making changes.

They want to be seen as changing for the better.

They know that only by improving their whistleblowing policies and systems can they mitigate any further damage to their reputation.

Setting up an external whistleblower hotline helps these organizations in several ways.

First, simply having a tried and trusted whistleblower system in place can be seen as vigorous action to help prevent future wrongdoing.

It can be seen as concrete evidence of change.

Second, the use of an external whistleblower provider lends an air of independence to any whistleblowing process. Especially if that provider allows anonymous and semi-anonymous reporting. Indeed, one of the main obstacles for an employee to become a whistleblower is the fear of reprisals from his colleagues.

By promoting the independence of a whistleblower process, an organization can actually encourage more reporting, which can lead to recovering losses, warning of wrongdoing earlier, or simply preventing it from happening.

And third, the establishment of a new external whistleblower hotline actively builds trust…trust in a company’s senior management…trust that senior managers know what they are doing and are simply not prepared to accept any tolerance for wrongdoing.

The latter, more than anything else, sends a message to all would-be wrongdoers…that wrongdoing – in any form – will not be tolerated.

2) New legislation

New whistleblower legislation and new customs directives will always have an impact on businesses and organisations.

In January 2021, additional guidance from US Customs and Border Protection (CBP) was implemented.

December 2021 saw the implementation of the EU Whistleblowing Directive.

It also had – and is having – a ripple effect in the UK, despite Brexit, due to the need to maintain a level playing field.

In 2022, companies around the world have already assessed how this major piece of EU legislation affects their legal obligations, especially for those with legal divisions or entities within the European Union.

On January 1, 2023, the German government will implement the Supply Chain Due Diligence Act
(Lieferkettensorgfaltspflichtengesetz, LkSG)require organizations with direct and indirect suppliers to comply with due diligence obligations in order to improve human rights, material standards and environmental protection.

You only need to take a look at the above to realize that the new whistleblower legislation requires constant monitoring and, if necessary, action taken to stay compliant.

3) Do the right thing

Many senior executives and directors want to do what’s right for their employees, and implementing an external reporting process as part of an environmental and social governance (ESG) plan is a quick and easy way to help. achieve it.

But what’s really interesting is that there are also huge benefits to doing the right thing.

Workplace harassment or poor manager behavior is cited by 15% as a cause of employee stress, mental health and depression.1

By taking a proactive approach and addressing poor working conditions through a whistleblower hotline, an organization can potentially increase staff retention and productivity.

Simply put, taking care of your employees means they will take care of you.

4) It’s good for public relations

Getting a new whistleblower helpline on board becomes an “easy sell” when it also allows the organization to present a positive image of itself to customers and employees.

While being “seen” as caring has only a modest positive effect on stock price – ie the perceived value of a company – being perceived as lacking in caring can have a significant detriment to the value of an organization.

This can be amply seen in the Science Direct article “When ESG meets AAA: The effect of ESG rating changes on equity returns”.

This study of US companies between 2016 and 21 found that ESG – of which whistleblowing is a big part – provides modest gains of 0.5%, but the lack of ESG runs a huge risk of -1.2% per month.2

So the real question becomes, why wouldn’t an organization want to implement something that will actively support its value?

5) Future proof

Some companies only start looking at anti-fraud hotlines and whistleblower vendors after they have been inadvertently caught up in wrongdoing by an employee or employees…other companies and organizations might take a more far-sighted view – some could even say wiser – and try to prepare for the future in advance.

Consider the sustainability of an organization through a whistleblower solution as a kind of insurance.

Very often, just having a whistleblower reporting system in place will actively deter wrongdoing in the first place, and while you can never prove a negative – that is: you will never know how many wrongdoings you yourself have avoided – we might be able to see, by comparing statistics within your industry, how many issues an organization ‘could’ have avoided.

For example, fraud-related losses were 50% lower in organizations with hotlines than those without.3…and for every EUR 1 invested in whistleblower protection, there is a potential return ratio of 22:1 on funds recovered4.

What will be your reason for implementing a whistleblower process?

These are…the top five reasons why an organization would want to set up an external whistleblower service.

More and more companies and organizations are choosing external whistleblower service providers to help them implement reporting channels within governance policies.

It is not difficult to understand why.

Installing an alert system is relatively inexpensive compared to in-house staffing and overhead; it ticks the legislative boxes; it helps you stay out of trouble…both personal and criminal; it can help improve staff productivity and goodwill; they make you look good in the eyes of the world…which is reflected in your stock and your organizational value, and if the worst should happen and wrongdoing does happen, you can truly say you tried to stop it .

Hopefully these are compelling reasons why you should consider setting up an external whistleblowing line.

Please don’t leave it until you’ve suffered some real damage to your reputation.

Footnotes

1. Canada Life Group Benefits Research – Mental Health, December 2015

2. https://www.sciencedirect.com/science/article/abs/pii/S1544612321003342

3. https://www.whistleblowers.org/wp-content/uploads/2018/11/pwc_survey.pdf

4. https://minhalexander.files.wordpress.com/2018/06/estimating-the-economic-benefits-of-whistleblower-protection-in-public-procurement-et0117799enn-en-1.pdf

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

Shirlene J. Manley