Risk assessment: The value of a whistleblower hotline

Updated: Mar 31

Are you able to identify the level of fraud and corruption risk that your organisation is affected by and do you recognise the value of a whistleblower hotline where anonymity is enabled and measure its impact.

If you value your integrity be prepared to take a beating from those who have none


It is recognised by several global reports that includes the Association of Certified Fraud Examiners where organisations introduce a hotline can in many cases be the best way of collecting data and receiving reports on fraud and corruption risk. To reach their conclusions 2,504 cases were reviewed from 125 countries and specific trends were identified:

  • Corruption was the most common scheme in every region globally

  • CFEs estimate that organisations lose 5% of revenue to fraud each year

  • Asset misappropriation are the most common schemes and least costly

  • 43% of reports were received by tip and half of those tips came from employees

Risk assessment

Building an accurate risk assessment requires the ability to identify and collect available internal and external information and the Report to the Nations by ACFE clearly outlines the benefit of introducing a whistleblower hotline. These whistleblower tips not only identify areas of risk but allow for an organisation to assess its risk picture.


In its 2018 Ethics & Compliance Hotline and Incident Management Benchmark Report, Navex Global analysis of nearly 2,479 hotline and incident management customers revealed key data points:

  • The overall report volume remained at the highest level recorded to date at the median of 1.4 reports per 100 employees

  • The substantiation rate of all cases increased by 10 percent to 44% the highest level recorded

  • The substantiation rate for anonymous reports increased to 39%

  • Maturing ethics and compliance programs mean more employees recognise the need to report issues, and know how to do so

  • A steady decrease in the rate of anonymous reports from the 2009 peak rate of 65 percent. This reduction is reported as an indicator of trust in the system and the people who manage it

Confidentiality and protection

However, in many countries whistleblower law and protection is inadequate or inconsistent and doesn't effectively protect individuals that make reports of suspicious activity in good faith. Building an anti-fraud and corruption culture that incorporates staff, suppliers and third parties creates an opportunity to collect additional information that would otherwise not be reported.


Creating an environment where individuals that wish to report suspected criminal conduct or breaches of organisation policy, they are clear about the integrity of an organisation, that they will deal correctly with reports made, that their personal data is secure and that their identify where requested is kept secret can in many circumstances be a difficult hurdle for whistleblowers to accept and overcome. This may be more relevant where past experience has reinforced this belief.

Anonymous whistleblowing

So how do we increase the opportunity to receive reports, that can be a challenge even when an organisation has a strong ethics culture. In areas, for example, where an organisation recruits from a local community and its supply chain is also served by local business, can an environment of conflicts of interest, corruption or collusion develop. If an individual were to report criminal behaviour what would the consequences be and could their anonymity be protected. There are many examples of where active attempts have been made by leadership within an organisation to identify a whistleblower with the intention of discrediting or to retaliate against the individual.


Conclusion

It is recognised that anonymous reports can be more difficult to investigate, however, what is clear from the Navex Global report is that although the number of anonymous reports are decreasing the substantiation rate for these reports has increased. Thus, the benefits of having an anonymous whistleblower facility is a valuable tool that supports an organisations ability to profile its risk. Does your organisation promote anonymous reporting or is it something that is frowned upon?