Implementing a smart whistleblowing programme

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Implementing a smart whistleblowing programme

As reported by the Harvard Business Review in January 2020, researchers from the University of Utah and The George Washington University School of Business concluded that whistleblowing programmes are critical to the financial health of any business, as they lead to lower fines, smaller bills from settlements and fewer material lawsuits for compliance breaches. This encompasses all breaches, from falsifying expense reports to sexual harassment to regulatory breaches.

Whether there are now more compliance breaches and crimes to report, or whether people are just more willing to report them these days, the conclusion remains the same: an effective whistleblowing programme makes sense from a reputational, employee morale, governance, financial, ethical and regulatory perspective.

Six key points to keep in mind to ensure an effective whistleblowing programme

1. Processes for the whistleblowing programme must be appropriate and mapped 

A compliance breach could involve a direct supervisor or the very personnel tasked with investigating breaches. Alternate routes for submission and investigation should be triaged, preferably by an outsourced third party receiving the information. Clear and timely processing, documenting the information received in report logs and regular follow-ups should also be built into the whistleblowing programme.

2. Whistleblowers must trust the system and feel validated

Both the United S Dodd-Frank Act and the Sarbanes-Oxley Act have provisions protecting whistleblowers from retaliation. As a rule of thumb, whistleblowing programmes must prohibit retaliation against whistleblowers. This is because, in order to be effective, whistleblower protection mechanisms must be persuasive enough that informants feel truly safe to make (often anonymous) reports about sensitive issues. At the same time, stated procedures in a whistleblowing programme should reassure the informant that objective investigations will take place.

3. Reporting should be simple with consistent and objective principles

Automated processes and clear and concise step-by-step guidance on how to make a report give stakeholders confidence that a firm's whistleblowing programme's principles are being applied consistently, fairly and uniformly across the entire organisation. Simple reporting in the informant's native language adds to the frequency of whistleblowing.

4. Tone at the top needs to be clear and communicated

Obtain senior management buy-in for the entire process and make sure those at the top communicate to employees their commitment to the whistleblowing programme, including non-retaliation and the application of structured and consistent procedures. Appointing a non-executive director to champion the firm's whistleblowing programme is expected by the Financial Conduct Authority in the United Kingdom and constitutes a best practice in all other jurisdictions.

5. Everyone in the firm must receive whistleblowing training

Whistleblowing training can be incorporated into existing annual regulatory training as well as management training and serves to promote and highlight the principles of a firm's whistleblowing program. Transparency in processes and procedures and communicating the same through regular training leads to trust in the whistleblowing programme.

6. The whistleblowing programme must be confidential, reliable, safe and secure

Privacy, reliability, safety and security must be built into every whistleblowing programme and this necessarily requires encrypted systems, preservation of all data including incorruptible report logs and often AI technology.

Well-constructed whistleblowing programmes help firms to maintain/preserve good reputations, assist in defending against regulatory censure, guard against financial losses and reassure all firm stakeholders.

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