NOT HAVING A WHISTLE BLOWER HOTLINE IS LIKE GOING HOME AND LEAVING THE DOORS UNLOCKED AT NIGHT.
Darrell Smith CFE, ARM, CIM, FCSI
You wouldn’t finish your work day and then go home and leave the doors unlocked to your business. Of course you wouldn’t. Not only would the unlocked door create an enormous security risk, you probably wouldn’t sleep that well. So not having an employee reporting hotline is like leaving the doors unlocked and hoping that you’re lucky enough that no one comes by and finds it open. Because if they get inside your business it could be very costly.
Even with modern security technologies, your first and most important line of defense is your locked doors. Alarm systems, and Closed Circuit Television Systems are just part of your overall security program.
My point is that even with modern security technology there are shortcomings that do not identify what I will refer to as the “intangible” occurrences of a criminal, regulatory, and human resources nature. What I mean by intangible occurrences are activities that are not apparent in the day to day operations of the organization. Such as an employee claiming expenses that they are not entitled to, an employee being discriminated against, an employee dumping toxic waste into the sewer system or a buyer taking kickbacks from the supplier. These events would probably not show up on a security camera, however your employees and even sometimes your customers may have evidence of these violations.
Employees who work in the specific area may have knowledge of such incidents, either through direct or circumstantial evidence. Yet they may hesitate to report the incident because of fear of reprisal or not knowing how or to who to report it too.
Organizations that do not have a reporting mechanism, have higher dollar losses because it takes longer for the event to be discovered, run the risk of legal, regulatory and criminal actions, have lower employee morale and risk damaging their reputation.
So What Is A Whistle Blower Hotline?
A Whistle Blower Hotline is an anonymous means for employees to report wrongdoing, knowing the report will be taken seriously and investigated. It is not for employees to report disagreements between themselves and their bosses or fellow employees.
Some hotlines are to just report fraud or environmental issues, while others allow any kind of violation to be reported, such as Fraud, Theft, Discrimination, Harassment, Bullying, Corruption, Sexual Harassment and any other violation.
Reports can be made by telephone 24/7 or online.
Why Is a Hotline So Important?
Studies have shown that if employees do not have an anonymous means of reporting workplace violations, they will either not report the violation, quit, go to the media or go to the police. By not reporting it, this causes additional financial losses to the company, can result in legal or criminal charges, and can cause unrepairable harm to the reputation of the business.
According to the Association of Certified Fraud Examiners 2020 Report to the Nations; The Duration of a Fraud Scheme, has a direct bearing on the median loss an organization incurs. The median loss is $50,000 for a fraud that lasts for 6 months and $740,000 for a fraud that lasts 60 months. It’s clear that the longer a fraud goes undetected the higher the losses. While this is just for fraud, I’m certain that this would be the same for any other kind of a violation. Whether it’s a criminal, regulatory or human resources in nature.
What is the Value of the Information Received from a Hotline?
Considering that all of your employees have knowledge of your operations and can see, hear or have physical evidence of potential violations. Why wouldn’t you want to make every employee an intelligence operative for your company? If you have 100 employees, that’s one hundred sets of eyes and ears gathering information, looking out for the companies best interests.
In the intelligence community, when evaluating intelligence information. You look at the source of the information and the quality of the information. So it makes sense that an employee would be in a position to have knowledge of violations. Even your customers and subcontractors would be in a position to have important information.
So Why Do So Many Businesses Not Have A Hotline?
In my experience with our in house hotline, I have heard many reasons for not having one. We are too small, the unions don’t want us to have one, the bosses don’t want any more headaches or we have a reporting mechanism already. This is my favorite because, they think that having a policy where information is to be reported to their immediate supervisor will work. The problem with this is that the employee cannot remain anonymous, they fear repercussions from the individual they are reporting or their employer. The one thing that all organizations can rule out for not having a whistleblower hotline is cost. The cost can be as little as a dollar per employee per year, with usually a minimum subscription. So a small business with 100 employees would pay $1000 per year, for a hotline service. I have just quoted a price for our Workplace Violations Hotline, other hotline prices may vary.
As Part of a Compliance Program.
A whistleblower hotline forms the basis of a compliance program, along with a Code of Conduct and Ethics and the ability to investigate all complaints in a timely manner, the tracking of all complaints to determine trends and for additional follow up. So every business regardless of size or financial condition can have the three cornerstones of a Compliance Program. By having a Hotline it tells all your employees that you take all violations seriously, and by creating a culture of “it’s the right thing to do” by reporting wrongdoing in your organization.
So in this post Covid 19 environment, where revenues and profits are down and many employees are working from home. Implementing a hotline is not only a prudent move, but will provide an excellent Return on Investment and peace of mind.