Ignorance is bliss, or is it? The power of whistleblowing.
March 12, 2014
"Why, when whistleblowers will readily forewarn you given the chance, burying your head in the sand is needlessly risking not just your brand and reputation!"
KPMG’s 2012 Australian/New Zealand Fraud Survey outlined the extreme growth in corporate loss attributed to fraud between 1997 – 2012 See figure one. The report outlines the importance of preventative controls and risk strategies, along with the value confidential third party reporting programs deliver.
Whistleblowing has a vital role to play in more than just fraud:
- Directors and Officers have the ultimate duty of care, but there are also provisions for persons concerned in the management of the company to use due diligence to prevent a breach of any relevant legislation occurring. Liability now extends beyond losses in terms of penalties and fines to the company.
- Laws on bullying and harassment and other forms of discrimination apply to all those who work at the company. The legal doctrine of vicarious liability means employers are legally responsible for the discriminatory acts of their employees.
- Employee theft or fraud relates directly back to the Director and Officer’s responsibility to create the right environment to ensure that sufficient controls are in place. The larger the company with diverse locations across Australia makes this task even more arduous as the ability to control the environment is reduced.
- Poor management could not only harm the reputation of the company but could also result in civil damages being awarded against the company or individuals, including Directors, Officers and Managers. It is unlikely in most instances that insurance will cover the fine.
Risk Managers, Compliance Managers, Internal and External Auditors have vital role to play to make senior management, Directors, Officers, the Boards and the Risk and Compliance Committees aware of the importance in having an effective whistleblowing system or procedure in place.
To encourage people to come forward, government and private sector organisations must work to make those with information feel safe, secure and provide them with the support to report illegal, unethical or inappropriate behavior confidentially and anonymously.
The workplace culture must make it easier for people to speak out. Historical methods of reporting, such as subjecting people (whistleblowers) to a face to face interview or interrogation over the telephone and running the risk of being identified, misunderstood or misquoted are not in tune with today’s digital world.
Recent industry surveys in the United States and the UK show that whistleblowing hotline providers, having traditionally relied on the telephone reports, are now finding 40% of their information is coming via email/online. This percentage is even greater where an integrated web server application is used to provide greater levels of security and anonymity.
Whistleblowers with information want to unburden themselves and want to be ensured their information will be received, respected, investigated and their identity protected. Despite an organisation’s best efforts some people unfortunately have an inherent distrust of their employer / government.
A complementary external whistleblowing program with a web-based capability can:
- Significantly enhance an organisation’s responsibility to their employees to maintain a safe working environment.
- Reduce the risk of fraud
- Reduce the risk of inappropriate workplace behavior resulting in workers’ compensation claims, formal complaints, expensive litigation and prosecutions from statutory authorities
- Reduce the reputational risk of any organisation.
As outlined in KPMG’s Fraud Survey, ‘prevention is the best medicine’ in any detection strategy both from a financial and reputational standpoint. Don’t leave it to chance, make 2014 the year your organisation employs a comprehensive and modern whistleblowing program.