A ‘Speak Up’ Culture – a value proposition
By Scott McLintock,
As a value proposition, investing in your corporate culture is as important as research and development, marketing and service delivery. This article touches on the benefits of having a hotline as a pillar of a strong ethics and compliance program driving solid financial performance. It also looks at the new legislation currently before parliament that will require ‘Regulated Entities’ to implement and maintain a whistle-blower policy.
One of the foundations of a strong corporate culture is having healthy communication channels between employees and senior management to enable informed business decisions to be made. Open communication channels encourage staff to come forward if they become aware of misconduct or have other concerns or queries that they want to escalate accordingly. Having an effective ‘whistle-blower’ hotline supported by well formulated policies, is one way of promoting open communication and in my view, a prudent investment for all organisations.
The 2018 ACFE Report to the Nations reveals that tipoffs are the most common method of detection for fraud, with employees providing over half of the tipoffs and nearly one third coming from external parties. This finding is not a one-off. Similar findings were published in the 2002 ACFE Report to the Nations, so cultivating tipoffs is a tried and tested way of identifying fraud and helping an organisation to become fraud resilient. The survey also found that organisations that had a hotline detected fraud more often than organisations without a hotline. The Australian Standard, AS8004-2003 Whistleblower Protection Programs for Entities, lists other benefits of having an effective whistle-blower program which include better compliance outcomes, more efficient financial management, a healthier and safer work environment, improved morale and an enhanced perception that the organisation takes its governance obligations seriously. When you consider that the annual cost of occupational fraud to an organisation is approximately 5% of annual revenue, it becomes even more compelling for organisations to have a hotline as a mechanism to improve the bottom line.
The mere existence of a hotline and accompanying policy does not alone guarantee that the above listed benefits will befall an organisation. The success of a hotline needs to be supported by a well-structured communication strategy - making people aware of the hotline so they know where to find it, policies which set out how the disclosure will be handled from start to finish and what support channels are available for the Discloser. The organisation then needs to ensure that the disclosures are handled in accordance with the prescribed methodology. A single poor experience by a Discloser can undermine the hotline, calling into question the integrity of the system. Word gets around. If a Discloser feels that the matter is not taken seriously or dealt with properly and confidentially, the Discloser may seek other avenues including directly approaching the regulator or media, resulting in an organisation losing control of how the matter is handled.
Likewise, a well-run hotline can cultivate a wealth of intelligence for an organisation and potentially damaging conduct can be identified and dealt with in a timely manner. It is therefore imperative for an organisation to carefully consider how they propose promoting the hotline and ensure the required resources are in place to implement and manage it.
Fear of reprisal and retaliation is a key consideration of anyone making a disclosure about potential misconduct. A Discloser must feel that their wellbeing is considered once they make the disclosure. This will be a determining factor as to whether they come forward or keep information to themselves.
The organisations where I have witnessed the best ‘speak-up’ cultures, include in their Code of Conduct or other policy, specific provisions dealing with retaliation against people making disclosures, regardless of the reporting mechanism (i.e. hotline, supervisor, HR etc.). It is backed with a zero-tolerance approach to individuals found to have targeted individuals who have come forward on reasonable grounds of suspecting misconduct. Providing protections for Disclosers is therefore a critical consideration in the preparation and implementation of any hotline and supporting policies.
If the previously mentioned benefits are not sufficient motivation for organisations to implement a hotline, the proposed changes to the whistle-blower landscape here in Australia will bring its importance sharply in focus. The Treasury Laws Amendment (Enhancing Whistle-blower Protections) Bill 2017 currently before parliament, if passed, is scheduled to be enacted by early 2019. The introduction of the proposed legislation will, among other things, require ‘Regulated Entities’ to have or implement a whistle-blower policy which provides a much-needed boost to the whistle-blower regime in the private sector. Improving the rigour around organisations having and maintaining a whistle-blower regime is an important step to improving the ethics and compliance regimes of organisations (see Banking Royal Commission) and protecting those people who have the courage to come forward and make a disclosure when they become aware of misconduct.
Providing an avenue for your employees to report misconduct in a confidential and anonymous way, without fear of reprisal, is a critical element of a strong ‘speak up’ culture. A hotline coupled with a comprehensive whistle-blower policy is in my view a must have as part of any governance regime as it provides a mechanism for organisations to keep a finger on the pulse of key organisational risks, both current and emerging, providing early warning and allowing for a timely response before becoming a critical issue. The proposed new legislation will impose requirements for Regulated Entities to implement and maintain a whistle-blower policy which are aimed at bolstering the rigour around private sector whistle-blower protections. Regardless of the legislation, an organisation that fails to have or implement a whistle-blower hotline and accompanying policy, runs the risk of missing out on a long list of benefits including harvesting a treasure trove of intelligence and insights into key organisational risks and having a positive impact on the bottom line.
Linkedin Blog – A ‘Speak Up’ Culture – a value proposition
By Scott McLintock
Some of the largest and most high impact investigations that I have been involved with, have come via a Discloser who is an employee or works directly with the organisation (e.g. contractor). Having a workforce as an extra set of eyes and ears is invaluable for an organisation responding to current and emerging risks. I have seen positive cultural change take place before my eyes in geographies where speaking up has historically been frowned upon (e.g. Eastern Europe). An effective hotline coupled with a well thought through communication strategy, sponsored and promoted by senior management was the catalyst for change.
If you are considering implementing or need help managing a hotline, please contact firstname.lastname@example.org and we will arrange a call/meeting to discuss your requirements.
 I don’t like using the phrase ‘whistle-blower’ due to the negative connotations that can come with the term, but for ease of reference and to avoid any confusion about what I am talking about, the term is used throughout.
 Association of Certified Fraud Examiners
 Tip/tip offs – a report made about alleged misconduct.
WHO IS CURBYPARTNERS?
‘Because fraud happens’, you can’t afford to ignore it. A fraud can have a significant impact on an organisation beyond losses suffered directly from the fraud. There are also the costs associated with investigating, litigating, regulatory ramifications, public relations, staff management and the time required managing the fallout from a fraud.
A proactive approach is a sensible and cost-effective method to prevent fraud occurring in the first instance. We typically find that organisations rely on standard controls supported by policy and procedures as the only line of defence against fraud. This is simply not enough, and your stakeholders and regulators expect you to take a more robust, proactive approach to protecting your organisation from financial loss and other associated risks.
CurbyPartners can assist you become fraud resilient by adopting a methodology which combines skilled interviewing techniques and tapping into the knowledge of your staff who are at the coalface of business operations, to help uncover where your organisation is exposed to internal and external fraud. We will then provide you with mitigation strategies to reduce the risk of a fraud incident occurring