Whistleblowing systems

In April 2019, a new EU Whistleblower Protection Directive was approved, aimed at protecting the rights of whistleblowers. One of the outcomes of the new law is that all organisations in the EU with more than 50 employees will be obliged to provide safe reporting channels within two years. At the same time, fighting corruption, discrimination and harassment has risen to the top of management and board agendas globally. Whether an organisation is looking at whistleblowing systems as a matter of compliance, as a risk management hygiene factor or as a way to give its people a voice, the role played by its management team and board is decisive for the whistleblowing results to be successful and valuable.

“With the new law, whistleblowers will be protected even if they decide to report externally to the organisation in question,” says Gunilla Hadders, co-founder and partner at WhistleB. “Our advice to management teams and boards is therefore to do everything they can to encourage internal reporting. After all, it is better to deal with wrongdoing internally, than risk sensitive information ending up in the public domain.”

Whistleblowing benefits

The key purpose of any whistleblowing system is to enable companies to detect and act on misconduct before it causes too much damage. Today, organisations are seeing wider benefits from such systems:

  • Build trust: in WhistleB’s '2019 Customer Survey’ on organisational whistleblowing, some 50% of the responses stated that building trust was the main benefit of having a whistleblowing system, as it indicates that organisations value transparency and openness.

  • Reduce the losses from fraud and corruption: according to the Association of Certified Fraud Examiners’ ‘2018 Report to the Nations’, fraud losses are 50% smaller in organisations with whistleblowing hotlines than those without.

  • Help to detect a wide range of irregularities earlier:another finding of WhistleB’s ‘2019 Customer Survey’ is that financial irregularities, harassment and discrimination account for more than half of the whistleblowing reports received. Health and safety, and workplace-related issues, were each the subject of some 13% of reports received. This highlights how important whistleblowing systems are for the early detection of many types of misconduct.

The critical role of leadership

Implementing a whistleblowing system is not simply a matter of buying a service and then switching it on. Nor should it merely be delegated to an organisation’s legal and compliance department. As indicated at the beginning of this article, there are serious requirements of boards and management teams in conjunction with the implementation of a whistleblower system:

Create an environment of trust:

Implementing truly anonymous channels increases the likelihood of receiving business critical reports on serious misconduct and hence having the chance to minimise damage. This is because people fear retaliation, and allowing them to remain anonymous in reporting, follow-up dialogue and any investigation will increase their confidence to report.

Allow anonymous reporting:

implementing truly anonymous channels increases the likelihood of receiving business-critical reports on serious misconduct. This is because people fear retaliation, and allowing them to remain anonymous in reporting, follow-up dialogue and any investigation will increase their willingness to report.

Safeguard company data:

leaders should insist on a whistleblowing system that has secure data management,is compliant with all applicable data protection laws and undergoes regular professional penetration and information security testing.

Prepare your organisation:

leaders need to ensure that their organisation’s processes can handle whistleblowing cases correctly. Carefully consider how whistleblower reports should be received and investigated, and by whom. Appoint an internal team that creates trust and has the competence to investigate cases in a compliant, respectful and secure way. The team should include non-operational individuals, such as members of the board and internal audit, as well as managers from a range of functions.

Take responsibility for investigations:

having opened up the organisation to whistleblowing, management and board members have the ultimate responsibility for investigations and their consequences. This involves ensuring the right system, skills and routines are in place for investigations, which must take place with the utmost confidentiality and with respect for both the whistleblower and the person accused. Processes also need to be in place for any action plans needed based on the outcome of the investigations.

Of course, there are other issues to consider. Investigations can be complex and require very specialist skills that leaders may need to source externally, for example. However, despite work required, the benefits of whistleblowing systems are clear.

For further information:

Gunilla Hadders, founding partner and senior advisor, WhistleB.